A credit score is a number that summarizes a person's credit history and estimates how likely they are to repay borrowed money. It is calculated from their borrowing and payment record.
A credit score is a numerical rating, commonly ranging from about 300 to 850 in widely used models such as FICO and VantageScore, that condenses a credit report into a single figure. It is generally calculated from factors such as payment history, amounts owed, length of credit history, new credit, and the mix of credit types. Lenders use the score to help decide whether to extend credit and on what terms, and a thin file or limited history can make a score unavailable. A credit score reflects past credit behavior and is one input among several, such as income and ability to repay, that a lender may consider.
Scores are produced by scoring models that read the information in a credit report: payment history, amounts owed, length of credit history, new credit and the mix of account types. Different models, and reports from different credit reporting companies, can produce different scores for the same person on the same day.
Lenders that use scores treat them as one input, often alongside income and other information. A person with little or no credit history may have no score at all, which is different from having a low one. Federal law also gives consumers the right to a free copy of their credit report from each nationwide credit reporting company.
Scores can change as new information reaches a credit report, such as a new account, a paid-off balance or a missed payment. Because lenders pull from different reporting companies and use different models, the score a consumer sees in an app may not match the one a lender used. When a lender takes adverse action based on a score, its notice will say which score was used.
An example
Two applicants earn similar incomes. One has a long record of on-time payments and a higher score; the other recently moved to the country and has no credit file, so no score can be calculated. A lender that relies on scores may treat the second applicant as unscorable, while a lender that reviews income and ability to repay can evaluate both on the same documents.
Common misconceptions
Myth: Everyone has a single credit score.
In fact: There are several scoring models and several credit reporting companies, so a person can have many different scores.
Myth: No credit history means bad credit.
In fact: A thin or empty file means there is not enough information to score, which is different from a record of missed payments.
Myth: Income is part of your credit score.
In fact: Credit scores are based on credit report information. Income is not in the report, which is why lenders ask for it separately.
What to check
- Whether a lender uses a credit score at all.
- Which report and scoring model a lender relies on.
- The errors to look for on your own report, such as accounts you do not recognize.
- What the lender considers besides the score.
How this applies at Desert Rock Capital
Desert Rock Capital does not use a credit score. There is no credit check, no minimum score and no credit history required; the review looks at your income and ability to repay. The amount you may be offered, if approved, is not based on your credit score either.
Based on our loan requirements, loan amounts and application pages. Your actual terms are in the loan agreement.