How Credit Works

Credit bureau scores are often called FICO scores since the vast majority of credit grantors use these scores developed by Fair, Isaac and Company (FICO). FICO scores are provided to credit granters by the three major credit bureaus: Trans Union, Experian and Equifax. Credit scores, sometimes called point scores, give credit grantors their best guide to the risk of poor payment performance based on credit report information. The higher the score the lower the risk of delinquency. No credit score indicates whether an individual will be a "bad" or "good" customer.

Many lenders use credit scores to help them make lending decisions and each lender has its own strategy, including the acceptable level of risk it is willing to take on, for a given product. There is usually no single "cutoff score" that determines a borrower's ability to secure credit as this is determined by each individual lender. There are many additional factors that lenders may use to determine credit eligibility and the terms and interest rates that a consumer is offered.