What is credit scoring?
Credit scoring is a system 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. Using a statistical program, creditors
compare this information to the credit performance of consumers with similar
profiles. A credit scoring system awards points 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 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.