What is a credit score?
A credit score is a numerical representation of an individual’s creditworthiness. Credit scores are generated by the three major credit bureaus, Equifax, Experian, and TransUnion. These bureaus collect financial data from banking institutions, credit card companies, lenders and other sources to generate a score for individuals. In Texas, credit scores are commonly used by lenders when evaluating financial decisions. Credit scores are based on the information in a person’s credit report. They range from 300 to 850 and are calculated by a mathematical formula. Factors that are taken into account when calculating a person’s score include repayment history, the amount of credit used, types of credit held, amount of time credit accounts have been open, and credit inquiries. A person’s credit score is an important factor when lenders are evaluating a loan or credit application. Generally, lenders prefer to give loans to individuals with higher credit scores because they are less likely to default on their loans. People with higher scores generally receive better interest rates and terms on loans. It’s important to keep an eye on your credit score as it could affect your financial future. Individuals may obtain a free credit report once a year from the federal government. Additionally, companies offer free credit scores for individuals to check on the status of their credit. The Texas Department of Banking has additional information on credit scores and credit reports.
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