10 Things Everyone Should Know About Credit Scores

1. Credit Reports Are Different From Credit Scores

Credit scores are calculated using the information on your credit reports, which includes details of your credit accounts, how often you apply for credit, debt collection accounts and some public records, among other things.

2. Your Scores Are Based on 5 Core Factors

Those factors are (in order of importance) payment history, credit utilization, average credit age, account mix and inquiries. You can find a more detailed explanation of each of those factors here.

3. You Can Get Your Scores & Reports for Free

You’re legally entitled to a free copy of your annual credit report from each of the three major credit reporting agencies: Equifax, Experian and TransUnion. 

4. Checking Your Own Score Won’t Hurt It

Only hard inquiries (aka when a lender looks at your credit when you apply for a loan or credit card) have a negative impact on your scores, and the effect is small and temporary.

5. There Are Many Different Scores & There Are Different Credit Score Ranges, Too

When you’re trying to figure out where you stand or if your credit is improving, make sure you are comparing the exact same score and that you know the range — wherever you’re getting the score from should tell you that information. For example, a 750 FICO score is not necessarily equivalent to a 750 in another scoring model.

6. Your Credit Can Help You Spot Fraud

If someone runs up a large credit card bill or takes out credit in your name, it will show up on your credit report and affect your credit score. Watch your score for changes you did not anticipate.

7. Your Credit Score Can Cost You Thousands Over a Lifetime

A low credit score means you’ll probably have to pay higher interest rates on things like credit card balances and mortgages. You can see an estimate of how much your credit will cost you using the Lifetime Cost of Debt Calculator.

8. Joint Accounts Affect Your Credit Scores, But There Aren’t Joint Scores

If you open a loan or credit card with a partner, the account activity will be reflected on both your credit reports. Joint accounts are different than authorized users, but whenever you share credit, make sure you’re aware of who will be responsible and who will be affected if a payment is missed.

9. Negative Information Eventually Ages Off

Different kinds of negative information will remain on your credit report for different periods of time (bankruptcy is an exception to this, for example), but generally, negative information ages off your report and no longer affects your score after 7 years.

10. Credit Scores Aren’t the Only Things That Matter for Lending Decisions

A credit score isn’t the only thing lenders consider when reviewing applicants. If you have no credit or poor credit, you may be able to secure a loan through an alternative lender, and in some situations, making a personal appeal or giving a lender more context to your credit report can help you access financial products.