The Real Definition Of A Credit Score                   

Your credit score is used in the credit application process by lenders to determine the terms of the credit that they extend to you.  A credit score is a triple digit number representing your credit worthiness.  You do not actually have just one credit score, but three different credit scores from each of the credit bureaus: Experian, TransUnion, and Equifax.  Each bureau uses information provided by your lenders, not by you, to calculate a credit score based on the reported information that makes up your credit report.      

There are several factors taken into consideration when calculating your score.  The factor that carries the greatest weight on your score is your own payment history.  There are several other factors that are considered as well, such as your debt-to-credit ratio, age of your credit history, forms of credit, and recent inquires.  Positive characteristics that will boost your score include: a lower debt-to-credit ratio, older credit history, utilizing various forms of credit, and fewer recent inquires. 

Your score could fall anywhere in the range of 300 to 850, where 850 is the highest achievable score.  A higher credit score is viewed more favorably by lenders.  It tells them that you have proven yourself as responsible with credit.  You have made your payments in a timely manner, maintained low balances, submitted minimal credit applications, and managed credit for a greater length of time.

When you have a credit score that is higher than average, you will typically have an easier time getting approved for a new line of credit or loan.  An additional benefit will be that you will frequently be offered lower interest rates, or find that security deposits will be minimized or even waived altogether.  

However, on the other side of the tracks are those with a lower than average credit score.  You lower your credit score with adverse actions that get recorded onto your credit report anytime you max out your card limit, make late payments, submit a large number of credit applications, or just simply having a brief credit history.  It is still entirely possible for consumers with a lower than average credit score to be granted credit, however they pay for it by way of higher interest rates and larger security deposits.  Yet, some consumers might still be denied for credit because of a low credit score.      

It is important to remember that your score is a numerical representation of your previous financial behavior.  A lower than average credit score does not state that you are unable or unwilling to make payments; nor does a higher than average credit score indicate that you are able or willing to make payments.  A credit score simply represents how you have handled past credit.  Lenders are unable to merely accept a promise of payment, and so they make decisions about your credit worthiness based on your score.  Therefore, making good financial decisions will be reflected in your good credit score.