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Credit
Score FAQ
Here are some
commonly asked questions about consumer credit scores.
Does
every consumer have a credit score?
No. There are certain situations where a credit score cannot
be calculated because one or more of the following has occurred:
-
Your
credit report does not contain at least one account
-
A remark
on one of your accounts references a person who is deceased
-
The
Social Security number on your credit report matches a
Social Security number in the Social Security Administration’s
“Death Claim Index”
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How
is the credit score calculated?
To calculate a score, numerical weights are placed on different
aspects of your credit report and a mathematical formula
is used to arrive at a final credit score. calculates
your credit score based on many factors of your credit history
and payment behavior. These many factors may include, but
are not limited to:
-
How
you are paying your accounts
-
How
much money you currently owe
-
How
long your accounts have been open
-
What
different types of credit you use
-
How
much credit you use compared to the amount of credit you
have available
-
How
often and how recently you have applied for credit
The credit industry
uses various types of credit scores to assess risk for different
types of credit. For example, a creditor may use one type
of score when assessing risk for a credit card account,
and another type of score when assessing risk for a mortgage
account.
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How
often does the credit score change?
Credit files continually update with new information from
creditors. Your credit score is calculated based on the
information contained within your credit file at the time
the credit score is calculated. Therefore, your credit score
can change every time the information in your credit file
changes.
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How
do inquiries impact a credit score?
An inquiry is recorded on your credit report every time
you, one of your creditors, or a potential creditor obtains
a copy of your credit
report. A common misperception is that every inquiry
decreases your credit score a certain number of points.
This is not true. Typically, the presence of inquiries on
your credit report has only a small impact on your credit
score, while certain types of inquires have absolutely no
impact on your credit score. Inquiries have less importance
than delinquencies, balances owed, and the length of time
you have used credit. Inquiries are usually more important
on your credit score if you have a limited credit history.
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How
can the credit score improve?
First, you should review your credit report for
accuracy. If you find any information that you believe to
be incorrect you should contact and/or your creditor(s)
to dispute that information. The correction of inaccurate
information on your credit report may have a positive effect
on your credit score.
Second, maintaining
a good credit standing and continuing to exhibit responsible
credit behavior are the best ways to ensure you are presenting
the most positive picture of your credit worthiness. Improving
your credit standing and your credit score is not a one-time-fix;
you must change how you view and handle your credit over
time.
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