A quick introduction to how credit scores work

A quick introduction to how credit scores work

Several factors go into determining your credit score. The pie chart above shows the weight typically given to each factor, but the weight varies from individual to individual.

Your credit could make a big difference in your next apartment search. So how do the credit reporting agencies come up with your FICO or other credit score?

Since it’s a number, it makes sense that mathematical formulas are involved. The formulas take information on your credit report and compare it with patterns from hundreds of thousands of past credit reports on file at the agency.

In order for the calculations to work, your credit report has to have at least one account that has been open for six months or longer and at least one account that has been updated within the last six months. This gives the agency enough information to run the numbers.

A number of different items go into the calculations. We will describe these in detail in the next several posts. While changes in any one item will likely have little or no effect on your score from one month to the next, your score will change over time based on those changes. Late payments and bankruptcies, however, can quickly lower your credit score, and bringing that score back up will take time. That’s why you should check your credit reports and scores at least every six months.

A credit score gives landlords an estimate of the risk they will incur in renting a property out to you. These scores evaluate your financial responsibility and help the landlord determine the likelihood that you will pay your rent on time. Your credit report and score serves a financial report card and shows your potential landlord how financially responsible you’ve been in the past.  So make sure to stay on top of your credit report so it accurately reflects your credit history.

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