Can someone please explain to me how credit scores work?

Question

I hear about scores and bureaus and freezing your credit all the time, but I just don't get how it all works!

Answer 1

Credit score is a method of tracking a persons likelyhood to pay debt.  So the higher the score the more likely you are to be able to pay a debt.  So when a company looks at your score when you apply for a loan they will see good you are at paying debt and will evaluate the risk involved in loaning you money.  This practice then turns into calculating your intrest rate associated with your loan.

Everytime you forfeit on a loan or dont pay a bill and the agency you owe the money to reports it, then it makes your score go down and hurts your credit.  Thus making it harder to get financed for things like houses and cars and such on low interest rates.

Credit bureaus are the magical lepricauns that evaluate your credit score and receive and track the good and bad reports.

Freezing your credit basically prevents people from using your credit or you using your credit.  Good to use when your identity is being stolen, bad to happen when you are trying to build a business.

Hope this helps, good luck!

Answer 2

Educate yourself here:  http://www.myfico.com/CreditEducation/.  There's lots of very good information about credit reports and scores.

Answer 3

Here is a little information about credit scores. How it's calculated, and what the numbers mean.

Answer 4

bureaus don't freeze your accounts.  lawyers do that on behalf of people that haven't been paid.

go to www.myfico.com