Who Determines My Credit Score?

Your credit score determines whether or not you qualify for a loan, and at what rate of interest you can borrow. Having a good credit score means you get better rates, higher credit limits, and other benefits. So where does this score come from? Who determines this three-digit number that makes such a huge difference in your interest rate?

The answer is at once simple and complex. Typically, the three major consumer credit reporting agencies – Experian, Equifax and Transunion – are the entities that provide the information that your credit score is based on. These credit bureaus compile information on your creditworthiness and produce reports, called credit reports, which detail the information that they have on file. For instance, if you are late on a payment, or if you default on a loan, this information will be reported to one of the three credit agencies and noted on that agency’s credit report.

The same information does not always go to all three agencies. Some information may be reported to Experian, for example, but not to Transunion. Therefore, when these three agencies compile their own reports and determine a credit score for you based on the information they have on file, they may give you different credit scores. One credit bureau may give you a credit rating of 720, for instance, while another might give you a credit rating of 680. It is rare for there to be a wide difference between the bureaus; they are generally working with comparable information, so the three scores will be comparable. When determining your creditworthiness, most lenders will use an average of the three scores, or whichever of the three scores is the middle one (one being the lowest and one the highest).

Ultimately, the person who determines your credit score is you. If you have a history of timely payments and meeting your obligations, you will have a good credit rating, and qualify for better rates on credit cards, car loans, mortgages and the like. It’s important to pay attention to your credit score, and be prepared to repair your credit if necessary.