How credit is “scored”

Many people confuse credit reports and credit scores, but the two are quite different. Understanding that difference can help you to figure out why you have a particular score and how you can keep or improve it.

Credit reports

Credit reports, also known as credit files, are composed of the credit-related data a credit reporting company (CRC) has gathered about consumers from different sources. Credit reports include records of mortgage payments, credit card balances, credit card payments, auto loan payments, and credit inquiries. It may also include public records, such as tax liens and other information from government sources. You can obtain a free copy of your credit reports once a year from each of the three national credit reporting companies at or by calling 1-877-322-8228.

Credit scores

A credit score is a three-digit number (derived using a mathematical formula) from all the information in your credit report. That mathematical formula is called a credit scoring model, which attempts to measure the likelihood that you may default on a loan payment, which is defined as being more than 90 days past due. These models:

Not all credit scores will be the same; nor will they remain the same. Credit scores may differ from one source to the next because different lenders use different credit scoring models. And since a score is based on frequently updated credit files, it may vary over time. 

In fact, there are roughly 220 million consumers with credit files in the United States, and approximately 36 billion pieces of credit data are recorded on their combined credit files every year. That averages out to more than 15 changes to each consumer’s credit file every month. The impact that the information in your credit files has on your credit scores changes over time as well. Negative information, such as late payments, impacts your credit score less and less over time.

Don’t be alarmed by this. It’s entirely healthy and routine for your credit scores to change slightly.


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