New Student Special: Brief Introduction to Credit Score and Credit Report

It’s a commonplace but a unavoidable topic. I tried to help you digest the most important concepts through this post. The specific questions about credit score calculation will be answered at the next article!

Briefly, it is: Credit Score = Credit Report + Score Calculation Model

Credit report is, haha, a snitch recorded by the banker on your credit history. Actually, it is a report to document your lending activities, which will be tracked from the first loan relations with the bank. However, where is the report? It is conserved in the Credit Bureau. There are three main Credit Bureaus in the US: Experian, Equifax and TransUnion. The bank will report your lending records periodically and integrate all the collected data to produce a credit report.

Well, then what are the major factors for a credit report? I listed them blow in importance sequence:

  1. Payment History
  2. Credit Limit and Utilization Rate
  3. History Length
  4. New Account and Hard Pull
  5. Type of Credit

How do those factors influence the score? Will Hard Pull, as we all care about, greatly affect the credit score? The following posts will figure out those questions one by one but it is not hurried now~

A score calculation model is directly created to calculate your credit score. Different models would produce different scores. Thus, it is not surprising to see two different credit scores~

A main score model used in the US is FICO Score, which is developing every year, whose scores will be taken by the banks as the major reference resources for credit card application. Besides, some free credit report websites have their own calculation models. Therefore, the scores generated would differ greatly from FICO. But take it easy, for they are only for reference~

I’ve said there are three leading Credit Bureaus in the US. The differences formed between their reports will result in different scores, even though they all adopt FICO Model.

To sum up, credit scores are obtained from credit reports through score models. It is quite common to get different scores, for the contents of the reports might be different, so do the calculation models, but FICO scores should be taken as the criterion.

It is the end of the post. I’ll give you the detailed process of how is FICO score calculated!


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