Virtually all adults deal with situations when their credit score comes up, usually when applying for financing.  For many, it is a mysterious number that plays a major part in whether they qualify for a loan, how much they will pay, and sometimes even if they can rent an apartment.  So what is a credit score, anyway?

Simply put, it’s a number that represents your creditworthiness. It answers the question, “How likely are you to repay the loan?” The higher the number the better, and it changes over time, depending on your payment history.

Your credit score- that three digit number that summarizes your credit history- is in many cases the most influential factor in a lender’s decision to grant you credit and at what rate.  The higher the score, the less you’ll pay for the use of someone else’s money.  While lenders are the primary users of credit scores, some employers, landlords, and insurance companies also use them to evaluate applicants.

As information in your credit file changes, so will your credit score.  When you pay on your loans, use your credit card or take out new financing, these things are going to change the information in your credit file.  Each may impact your credit score.

Many consumers believe lenders use only one credit score, but there are many different kinds of scores in use today.  Most lenders use FICO scores (www.myfico.com), but there could be some variations even there.

FICO scores from all three major credit bureaus (Experian, TransUnion and Equifax), and is the most widely used.  FICO scores range from a low of 300 to a high of 850.  Another scoring system is called VantageScore, which has a scale ranging from 501 to 990, roughly paralleling a grading system of A to F.  VantageScore is much less commonly used.  There are other alternative credit scores in use today, and some lenders may promote their own scores.

Scores tend to vary from source to source, because in addition to differences in the underlying data each use, that providers may use a different scoring model and scale.  Mid Oregon uses a FICO scoring model in our financial decision making.

We will talk about what things raise or lower your credit score, and how to get your score, in future posts.

If you have questions about how your score is determined and how you can build your credit (score), visit a Mid Oregon Financial Services Representative or call us at (541) 382-1795.