Where do credit scores come from?

Where do credit scores come from? If you are going to improve your credit score, then logic has it that you must understand what your credit score is, how it works, and where it comes from. Without this information, you won’t be able to very effectively improve your score because you won’t understand how the things you do in daily life affect your score. If you don’t understand how your credit score works, you will also be at the mercy of any company that tries to tell you how you can improve your score – on their terms and at their price. In general, your credit score is a number that lets lenders know how much of a credit risk you are. Hence, a credit score is a number between 300 and 850 that gives lenders an idea of how capable you are of paying off your debts.

“If you don’t understand how your credit score works, you will also be at the mercy of any company that tries to tell you how you can improve your score”

-Douglas Latimer

Credit Risk

In general, the higher your credit score, the better credit risk you make. Therefore, the more likely you are to be given credit at great rates. Scores in the low 600s and below will often give you trouble when borrowing. However, scores of 720 and above will generally give you the best interest rates out there. However, credit scores give a quick snapshot of how you are doing, but people interpret them in different ways. Some lenders put more emphasis on credit scores than others.

Some lenders will work with you if you have credit scores in the 600s. However, others offer their best rates only to those applicants with very high scores. Some lenders will look at your entire credit report. But, others will evaluate your loan application based solely on your credit score. The credit score is based on your credit report, which contains a history of your past debts and repayments. Credit bureaus use mathematical calculations to arrive at a credit score from the information contained in your credit report.

Credit Bureaus

Each credit bureau uses a different method to do this which is why your scores are different. Most credit bureaus use the FICO or Fair Isaac Corporation credit score. FICO is used by many in the financial industry and is one of the leaders in the field. In fact, credit scores are sometimes called FICO scores. However, it is important to understand that your score may be tabulated using different software. The software uses statistical mathematics. This is important in that you can raise your credit score by appeases the software.


Credit bureaus and lenders often look at general patterns. People with too many debts tend not to have great rates of repayment. Your credit score may suffer if you have too many debts. Understanding this can help you in two ways.

  1. First, your credit score is not a personal reflection of how “good” or “bad” you are with money. It is a reflection of your credit worthiness based on information gathered from studying other people.
  2. Secondly, in order to improve your credit score, you need to exercise financial discipline and not necessarily make more money. You just need to be a reliable borrower. This realization alone should help make credit repair far less stressful!


Credit bureaus put together credit reports from information obtained from client companies. It works like this: credit bureaus have clients such as credit card companies, banks, and auto finance companies. Then, those companies provide the credit bureaus with information once a file is begun on. If you are late paying a bill, the clients notify the credit bureaus and they note this. Unpaid bills, overdue bills or other problems with credit count as “dings” on your credit report and affect your score.

where do credit scores come from
Credit Score

Information such as what type of debt you have, how much debt you have, how regularly you pay your bills on time, and your credit accounts are all information that is used to calculate your credit score. Your age, sex, and income do not count towards your credit score. Credit bureaus use a secret formula to calculate credit scores. However, it is known that recent account activity, debts, length of credit, unpaid accounts, and types of credit are among the things that count the most in tabulating credit scores from a credit report.

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