A credit score is based in large part on a person's credit history, which is a written record of that person's use of credit in the past and present. Learn more about credit, how it is calculated, and what you can do to raise your score by following the link below.

A file or report will be kept on your credit payment history. Consumer reporting agencies keep and sell these records (CRAs). A credit bureau is an example of a CRA. If you have ever asked for a credit card, a personal loan, insurance, or a job, then a credit bureau has a record of your financial history. Your credit report details your financial standing by detailing your income, obligations, and credit repayment history. It also shows if you've been the subject of a lawsuit, taken into custody, or forced to declare bankruptcy.

Provided you specifically request it, of course. The CRA is obligated to provide all information included therein, including any and all medical details and, in most situations, the sources of these details. For requests linked to employment, the CRA is also obligated to provide you with a list of everyone who has requested your report within the past year and a half to two years.

The four main types of data that credit bureaus gather and sell are:

Identification and employment information
Generally, information such as your name, date of birth, SSN, and place of employment. The name of your spouse will be recorded. If a creditor makes a formal request, the CRA may also divulge information about your past jobs, housing situations, income, and addresses.

Payment history
Creditors who have extended your money are cataloged alongside the amounts and timeliness of your payments. The referral of a past-due account to a collections agency is an example of a related event that may be recorded.

Credit reporting agencies are required by law to keep track of any lender who has requested your credit report in the past 12 months, as well as any employer who has done so in the prior 24 months.

Public record information
Publicly available information may be included in your report. This includes things like debts, foreclosures, and tax liens.

Lenders often use credit scoring to help them decide whether or not to extend credit. Credit applications and credit reports are used to compile information about you and your credit history, including but not limited to: how you handle bills, the number and types of accounts you have, any late payments, collection proceedings, outstanding debt, and the age of your accounts. Lenders run this data via statistical software to see how it stacks up against the credit histories of customers who have similar characteristics. Each indicator of a borrower's propensity to make timely payments is given weight in a credit score. Creditworthiness is measured by a numerical assessment of an individual's propensity to meet financial obligations, such as loan repayment and on-time payment

Credit scores developed by Fair Isaac Company, Inc. (FICO) are the most used type. A score of 350 indicates very high risk, while a score of 850 indicates very little risk (low risk).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.

Each of the three major consumer credit reporting agencies in the United States—Experian, Equifax, and TransUnion—must provide you with a free credit report once every 12 months.
The following link will take you to a free credit report that may or may not include your credit score: website https://www.annualcreditreport.com

Since credit scoring is founded on hard evidence, it is more trustworthy than more ephemeral approaches that rely on opinion or intuition. It does not favor any one applicant over another. Judgmental approaches frequently rely on criteria that have not been systematically validated and can vary depending on the person doing the evaluation.

A creditor will use statistical analysis to determine the factors that correlate with creditworthiness by selecting a random sample of its customers or a sample of similar customers if the sample is too small. After that, we give each of these factors a weight depending on how well it predicts who will be a good credit risk. Creditors may employ their own proprietary scoring systems, industry-specific models, or standardized systems produced by a third-party agency.

A credit scoring system cannot take into account a person's race, gender, marital status, country of origin, or religion in accordance with the Equal Credit Opportunity Act. However, age may be a factor in credit scoring systems if they are well-designed. A grading system that takes into account age must, however, treat candidates of all ages fairly.

Credit scoring systems allow lenders to objectively and reliably evaluate millions of applicants based on a wide variety of factors. However, credit scoring systems need a sufficiently sizable sample to be considered statistically valid. Keep in mind that the specifics of these systems can change from creditor to creditor.

You would dismiss such a system as cold and impersonal, but when it's done right, it can aid with decision-making more quickly, correctly, and fairly than any human being could. The systems of many financial institutions are set up so that applicants whose scores are on the cusp of passing or failing are forwarded to a credit manager who makes the final call on whether or not to grant credit. As a result, the credit manager and the customer may be able to have a productive conversation and possibly even come to an agreement.

Complicated and oftentimes varying between lenders and forms of credit, credit scoring formulas are notoriously difficult to grasp and implement. Your score may improve or decrease depending on the interplay between the various parameters used in the model, so changing even a single one can have an effect. Only the creditor can tell you how to increase your score based on the specific methodology they utilize.

Still, scoring models usually look at the following kinds of information in your credit report:

  • Have you paid your bills on time? Have your bills been paid on time? Usually, a big factor is how well you've paid in the past. If your credit report shows that you have paid bills late, had an account sent to collections, or filed for bankruptcy, it's likely that your score will go down because of this.
  • What is your outstanding debt? How much do you still owe? Many scoring systems look at how much debt you have compared to how much credit you can get. If the amount you owe is close to your credit limit, it will probably hurt your credit score..
  • How long is your credit history? Most of the time, models look at how long you've had credit. Your score may be hurt if you don't have enough credit history, but this can be made up for by things like making payments on time and having low balances.
  • Have you applied for new credit recently? When you apply for credit, "inquiries" on your credit report are looked at by many scoring systems to see if you have recently tried to get credit. If you have recently tried to open too many new accounts, that could hurt your score. But not every question is counted. Creditors who check your account or credit report to make "prescreened" credit offers are not counted as inquiries.
  • How many and what types of credit accounts do you have? Even though it's usually a good thing to have established credit accounts, having too many credit cards may hurt your score. Also, many models take into account what kinds of credit accounts you have. For example, loans from finance companies may hurt your credit score with some scoring systems.
    Most models say that the best way to improve your credit score is to pay your bills on time, pay down your balances, and not take on any new debt. It might take you a while to make a big difference in your score.

Ask the creditor if a credit scoring system was used if you were turned down for credit or didn't get the rate or terms you wanted. If so, you should ask what qualities or factors were used in that system and how you can make your application better. 

If you get credit, ask the lender if you are getting the best rate and terms available and, if not, why not. If there are mistakes on your credit report that keep you from getting the best rate, make sure to dispute the mistakes.


If you are turned down for credit, the Equal Credit Opportunity Act says that the creditor has to tell you why or that you have the right to know why if you ask within 60 days. Ask the creditor for a specific reason for the denial. It is against the law to give a reason that is too broad or too vague. "Your income was low" or "You haven't been working long enough" are both good reasons. "You didn't meet our minimum standards" or "You didn't get enough points on our credit scoring system" are not good enough.

If a creditor says you were turned down for credit because you are too close to your charge card limits or have too many credit card accounts, you may want to reapply after paying down your balances or closing some accounts. Credit scoring systems look at the most recent information and change as time goes on.

A credit report can sometimes be used against you to keep you from getting credit. If so, the Fair Credit Reporting Act says that the creditor has to tell you the name, address, and phone number of the credit reporting agency that gave them the information.

You should get in touch with that organization to find out what was in your report. If you ask for this information within 60 days of being turned down for credit, it is free. You can find out what's in your credit report from the credit reporting agency, but only the creditor can tell you why your application was turned down.

The Fair Credit Reporting Act (FCRA) is meant to make sure that credit reporting agencies (CRAs) give businesses correct and complete information about you that they can use to decide whether or not to give you a loan.

What the Fair Credit Reporting Act says about your rights:

  • You can get a copy of your credit report at any time. The copy of your report must have all of the information that was in your file when you asked for it.
  • You have the right to know the names of anyone who has seen your credit report in the last year or two years, depending on the reason.
  • If your application is turned down, the company must tell you the name and address of the CRA they talked to, if the decision was based on information from the CRA
  • When your application is turned down because of information from the CRA, you have the right to a free copy of your credit report. You have to make your request within 60 days of getting the letter telling you it was denied
  • If you don't agree that the information on your report is complete or correct, you should file a dispute with the CRA and the company that gave the information to the CRA. Both the CRA and the person who gave you the information are required by law to look into your dispute again.
  • If your dispute is not resolved to your satisfaction, you have the right to add a summary explanation to your credit report.