Nearly all lenders in the U.S. use credit scores to decide whether they will extend you credit and at what terms. FICO® Scores are used by thousands of creditors including the 50 largest lenders, making it the most widely used credit score. When you accept new credit and manage it successfully by consistently paying as agreed, you demonstrate to lenders that you represent a good credit risk. Lenders use your credit history as a way of evaluating how well you've managed your credit to date. A credit score summarizes information in your credit report into a single number that lenders can use to assess your credit risk quickly, consistently, objectively and fairly.
Explore these pages to learn the basics about FICO® Scores, including how FICO® Scores help you, what your FICO® Score means, what information in your credit report is and is not considered, as well as tips to help you get a FICO® Score established if you are new to using credit.
Here are some common myths about credit scores:Myth:
My score determines whether or not I get credit.Truth:
Lenders use a number of facts about you to make credit decisions, including your FICO® Score. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history and your credit history. Based on their analysis of this information, as well as their specific underwriting policies, lenders may extend credit to you even if your score is low, or decline your request for credit even if it's high.Myth:
A poor score will haunt me forever.Truth:
Just the opposite is true. A score is an indicator of your risk at a particular point in time. It changes as new information is added to your credit bureau files and as historical information ages. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. By taking the steps to improve your score, you can qualify for more favorable terms such as better interest rates.Myth:
My score will drop if I apply for new credit.Truth:
If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called "inquiries") will appear on your report. Looking for new credit can indicate higher risk to a lender, but FICO® Scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.
As you learn more about credit, credit reports, scores and the lending process, you'll be in better shape to take control of your credit future.