Credit scores in plain terms

A credit score is a number that sums up a credit report. It predicts your credit behavior, such as how likely you are to pay a loan back on time. It's based on your credit reports, and most credit scores range from 300 to 850.

What goes into it

• Your bill payment history
• The debt you currently owe
• The number and types of loan accounts you have
• How long your loan accounts have been open
• How much of your available credit you're using
• New applications for credit
• Any debt sent to collections, a foreclosure or a bankruptcy, and how recent it was

Each of those comes from what your credit reports show. A report lists your accounts with their balances, limits and payment history, plus collections and public records.

Why you have more than one

You don't have just one credit score. Scores differ by the data used, the scoring model, the type of loan, the source of the data and the date the score is calculated. Two scores from different sources can both be accurate and still differ.

Who uses it

Lenders and other companies use credit scores in decisions on mortgages, credit cards, auto loans and other credit. A score can affect the interest rate and the credit limit you're offered. A higher score usually makes it easier to qualify for a loan, and may bring a better rate or terms.

The report behind the score

Because the score is built from the report, read the report to see what's driving it. The three nationwide bureaus, Equifax, Experian and TransUnion, each offer a free report at AnnualCreditReport.com. How to get your free credit report and read it goes through one section by section.

An annotated example

What to do next

Order your free reports and read the accounts and payment history, since those feed the score. Write down each card's balance and limit, so you can see how much of your available credit is in use.