A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person, which is the likelihood that the person will pay his or her debts. A credit score is primarily based on credit report information, typically sourced from credit bureaus / credit reference agencies. Other countries might have similar scores.
Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.
Credit scoring is not limited to banks. Other organizations, such as mobile phone companies and government departments employ the same techniques. Credit scoring also has a lot of overlap with data mining, which uses many similar techniques.
United States of America
In the United States, a credit score is a number based on a statistical analysis of a person's credit files, that represents the creditworthiness of that person, which is the likelihood that the person will pay his or her bills. A credit score is primarily based on credit report information, typically from the three major credit bureaus, namely Experian, Transunion and Equifax.
There are different variants of credit score reporting. FICO is a credit score developed by Fair Isaac & Co scale. It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender.
Each year, an American is entitled to one free credit report from each of the three agencies. The three credit bureaus run Annualcreditreport.com, where users can get their free credit report, normally without the credit scores. The credit scores are available as an add-on feature of the report for a fee.
The system of credit reports and scores in Canada is very similar to that in the United States, with two of the same credit reporting agencies active in the country (Equifax and TransUnion). There are, however, some key differences. One such difference is that, unlike the United States, where a consumer is allowed only one free copy of his or her own credit report each year, in Canada the consumer may order a free copy of his or her own credit report any number of times in a year, as long as the request is made in writing, and that the consumer asks for a printed copy to be delivered by mail. This request by the consumer is noted in the credit report but has no effect on his or her credit score