TransUnion, Equifax and Experian keep your credit report information and make it available to creditors. The creditors then use that information to determine whether or not they want to lend you money in the form of a loan or line of unsecured credit such as a credit card.
Your credit score ranges from 350 to 850. Having a higher credit score will make it much easier for you to get loans and credit. If your credit score is low, it will be harder to get qualify for loans and credit, and you will pay a higher interest rate for any credit you do earn.
A personal credit score is calculated by these five areas:
- Payment History: Approximately 35% of a credit score is based on your payment history.
- Amounts Owed: Approximately 30% of a credit score is based on the amount of money you currently owe.
- Length of Credit History: Approximately 15% of a credit score is based on how long you have had credit available to you.
- Inquiries: Approximately 10% of a credit score is based on how many credit inquiries you have had over the last two years (though the effects of these inquires will diminish over time).
- Mix of Credit Types: Approximately 10% of a credit score is based on the mix of credit cards, auto loans, mortgage loans, and personal loans.