What is a Credit Score?

Basic Definitions:

• Credit Score: A statistically derived numeric expression of a person’s creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts. A credit score is based on, among other things, a person’s past credit history. It is a number between 300 and 850 — the higher the number, the more creditworthy the person is deemed to be.
• Credit Bureau: An agency that researches and collects individual credit information from banks, public records and other sources and provides it for a fee to creditors so they can make a decision on granting loans.
• Credit Report: A detailed report of an individual’s credit history prepared by a credit bureau that includes — among other things — personal data, a credit score, a summary of credit history and detailed account information.
• Credit History: A record of a consumer’s demonstrated responsibility in repaying debts. It consists of information such as: number and types of credit accounts, how long each account has been open, amounts owed, whether bills are paid on time and number of recent credit inquiries. It also contains information regarding whether the consumer has any bankruptcies, liens, judgments or collections. This information is all contained on a consumer’s credit report.
• Creditworthy: The measure of a borrower’s ability to repay debt.
• I have found that a very precise summary of the above definitions is found in the verbiage of the “FACT Act Disclosure” that is provided to all mortgage loan applicants as part of the standard mortgage loan application. The Fair and Accurate Credit Transactions Act (FACT Act) was enacted in 2003 and amends the Fair Credit Reporting Act (FCRA), a federal law that regulates, in part, who is permitted to access your consumer report information and how it can be used. It says:
• The credit score is a computer-generated summary calculated at the time of the request and based on information a credit bureau or lender has on file. The scores are based on data about your credit history and payment patterns. Credit scores are important because they are used to assist the lender in determining whether you will obtain a loan. They may also be used to determine what interest rate you may be offered on the mortgage. Credit scores can change over time, depending on your conduct, how your credit history and payment patterns change, and how credit-scoring technologies change.
• Because the score is based on information in your credit history, it is very important that you review the credit-related information that is being furnished to make sure it is accurate. Credit records may vary from one company to another. One or more of the following credit bureaus provided a credit score that was used in connection with your home loan application.
• Experian
  P.O. Box 2002
  Allen, TX 75013
• Phone 888-397-3742
  Model Used: Experian Fair Isaac
  Range of Possible Score: 340 to 820
• Trans Union
  P.O. Box 1000
  Chester, PA 19022
• Phone 800-888-4213
  Model Used: FICORiskScoreClassic04
  Range of Possible Scores: 300 to 850
• Equifax Credit Information Services
  P.O. Box 740241
  Atlanta, GA 30374
• Phone: 800-685-1111
  Model Used: EquifaxBeacon5.0 
  Range of Possible Scores: 300 to 850