Your credit score is very important. You can get your free credit score when you check your credit report. A creditor uses your credit score to determine if you'd be a good risk for credit cards and auto loans. Your free credit score can also be used to help creditors evaluate your ability to repay home mortgage loans. Here's how your free credit score works in helping decide who gets credit -- and why.

How Can My Free Credit Score Help?

A free credit score is what creditors use to help determine whether to give you credit.
Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report to determine your credit score. Using a statistical program, creditors compare this information to other people’s credit score. Your free credit score gets higher for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.
Because your credit report is an important part of your free credit score, it is very important to make sure it's accurate before you submit a credit application. Get a copy of your report, review it, and make sure it is accurate!

Why Is A Credit Score Used?

Your credit score is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals. You can get your free credit score when you check your credit report.

How Is The Credit Score Model Developed?

To develop a model, a creditor selects a random sample of its customers or a sample of similar customers if their sample is not large enough, and analyzes it statistically to identify characteristics that relate to creditworthiness. Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk. Each creditor may use its own credit scoring model, different scoring models for different types of credit, or a generic model developed by a credit scoring company.
Under the Equal Credit Opportunity Act, a credit scoring system may not use certain characteristics like -- race, sex, marital status, national origin, or religion -- as factors to determining your credit score. However, creditors are allowed to use age in properly designed scoring systems. But any scoring system that includes age must give equal treatment to elderly applicants.

What Can I Do To Improve My Credit Score?

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your credit score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your credit score under the particular model used to evaluate your credit application.