This hub “what is a credit score” has one aim, and that aim is to summarize in brief the definition of credit score, coupled with relevant issues pertaining to a credit score. Lots of people are embedded in web of inadequate information about what a credit score stands for. This article is written to explain briefly the meaning of credit scores.

What is a credit score?

In simple terms, a credit score is a measure of the financial credit worthiness of a borrower.

Most especially in this times of global recession and strong financial meltdown, there has been an increase in the level at which people are constantly applying for loans and financial bailout. With the ever increasing style and tough nature of the present mortgage business, the issue of loans and borrowing has been on the high side.

In broad and full explanation, a lender on receiving a clients credit score information, he/ she is able to assess the risk involve in lending money to the borrower. A credit score gives prospective credit grantors the best guide to risk of poor payment performance or non payment which is based solely on credit report data.

The mathematical calculation on the determination of a credit report is closely guarded by the credit bureau and also by fair Isaac Corporation.

For example, in the United States, credit bureau scores are called FICO scores because Fair, Isaac and company produced the software which is being used in determining credit bureau scores.

Now, Equifax and Transunion and Experian—the three major credit bureau provides FICO scores to lenders. The implication behind this credit score is that the higher the credit score, the lower the indicated risk.

Now, the question you may probably want to ask is “what are those factors that are needed/contained in the credit score report?

The factors contained in a credit score report includes:

1)         Your payment history

2)         The amounts you owed on accounts

3)         The length of your credit history

4)         New credit inquiries

5)         Type of credit used

Find below, a brief breakdown analysis on the above stated factors contained in a credit score report

1) Your payment history

Your payment history accounts for 35% of the credit score weight

2) The amounts you owed on accounts

This accounts for 30% of the credit score report

3) The length of your credit history

This accounts for 15% of the credit score report

4) New credit inquiries

This accounts for 10% while

5) The type of credit used accounts for 10% score.