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Credit Scores

How The Credit Bureaus Calculate Credit Scores

Every time you apply for credit, your past borrowing history is carefully examined.  Banks, finance companies, credit unions and credit card providers all make lending decisions based on calculated risk. 

The credit history of a consumer provided by a major credit bureau is the best indicator to lenders of an applicant’s credit worthiness.  Credit reports provide a wealth of information on financial history, current accounts, past bill paying history, previous addresses, and employment information.  These reports can have a big impact on your financial situation and that’s why a lot of people work hard to improve their credit scores.

Credit Bureaus

Historically, the network of credit bureaus, credit furnishers and users was created just after World War I.  Before that, individual retailers kept records on their own customers with little ability to share, or get information from other merchants in other parts of the country.

Currently there are three major credit agencies, Equifax, Experian, and TransUnion who maintain credit files on over 200 million people in the United States.  Credit history is a record of all of the credit accounts you currently carry, and have maintained in the past.  This includes any loans, mortgages, credit cards, or retail charge cards. 

Credit Bureau Reports And Scores

Credit-reporting agencies also referred to as credit bureaus periodically (usually every 30 days), collect data from banks, credit unions, finance companies, retailers, and courts of law.  The data includes information about the type of loan or line of credit you maintain with a particular lender, and how well you pay back the money you borrow.  A report also provides the consumer and lender with a credit score based on several aspects of the credit history. 

Consumers can easily request a credit score check from each of the three major credit bureaus any time throughout the year at their convenience.  A free credit check may be obtained once every 12 months from a credit bureau, or all three as well, 

Only the website, sanctioned by the United States’ government allows you to get a credit score free.  Whether you have a poor credit reputation or a good credit score, it’s important to understand the way in which consumer credit reports are organized.

Credit reports are divided into six main areas.  These include:

Identifying Information—This includes information that identifies you personally such as your name, address, date of birth, Social Security number and driver’s license number.  Any aliases, other married names, AKA’s (Also Known As), FKA’s (Formerly Known As), or maiden names are also included in this section.

Employment—Lenders and other creditors have the option of including your self-reported employment history in a credit bureau entry.  Though this information does not factor into credit scores, it can be an indicator of instability or untruthfulness to a prospective employer or creditor.

Consumer Statement—The consumer can record a personal statement about specific circumstances that may have affected their ability to pay creditors in a timely manner.  This can include details about unforeseen events such as accident, illness, sudden unemployment, or natural disaster that negatively impacted finances. 

Although the consumer statement does not alter the credit scores of an individual, loan processors, or loan officers can choose to take these specific circumstances into consideration when making a credit decision.

Account Information—The information regarding specific accounts makes up the bulk of a credit report.  This is the area that most creditors and lenders base their decision on.  This will include the creditors name, account number and type of credit, such as revolving account, student loan, etc. 

Account information will also include whether the account is joint, or if there is a co-signer who is also responsible for payment.  The monthly minimum payment, the date the account was opened, and the date the information was reported are all parts of the account information section as well.

The credit bureau report will also reflect the payment status including whether the account is current or past due, and the payment history that is an indicator of how well the consumer has made payments on time throughout the course of the loan or line of credit.

The balance of the account, the credit limit or loan amount, and the high credit amount is also included in this section.  The amount, if any that is past due is also recorded on the credit bureau report, as well as any remarks about the account made by the creditor. 

Public Records—This section included in a credit report includes information reported by the courts of law, such as property liens and bankruptcy.  Civil judgments are also included in public records.

Inquiries—Credit inquiries are recorded by credit bureaus every time a consumer applies for credit.  These can negatively affect credit scores since it may indicate the consumer is shopping around for credit.  It also allows prospective creditors the opportunity to determine whether a consumer has already obtained a loan or credit card from another creditor.

Your credit history says a lot about you, so it’s important to review your credit report before you visit a lender.  Once you apply for a loan or credit card, it’s too late to dispute inaccuracies in your credit file.  

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Jeff Dunphy

Jeff Dunphy has years of experience in the field of borrowing. He is the founder of a website that teaches consumers about credit cards, credit scores, loans, and credit repair.
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The content on is for informational and educational purposes only. It is not financial advice and we are not certified financial advisors. strives to keep its information accurate and up to date, but it may differ from actual numbers. We may have financial relationships with companies listed on our site. We may receive compensation for the placement of sponsored products or services. We work hard to write authentic and accurate articles.