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Understanding Your Credit Score and How Credit Scoring Works

So you might be asking yourself, "How does credit scoring work?"

To help you better understand scoring, TransUnion has introduced a new and improved way to help you manage your credit, with access to three VantageScores – an easier and more effective way to understand your credit rating.
  • Unlike previous formulas, VantageScore® was developed in 2006 by the three major credit reporting companies – TransUnion, Equifax and Experian.
  • The three credit reporting companies developed VantageScore to improve the consistency, accuracy and predictive quality of consumer credit scores, and to enable more consumers with limited credit histories to receive a credit score for the first time.
  • Consumer scores fall within a range of 501 to 990, with higher scores representing a lower likelihood that consumers won’t pay back their debts. Along with your VantageScore, you’ll receive a letter grade (A-F) to help you assess how lenders view you and how you compare with other consumers, and help you understand how credit scoring works.


To see how credit scoring works, here are the factors most basic credit scoring formulas take into account:
Payment history:
A good record of on-time payments will help your credit.
Outstanding debt:
High balances in relation to your credit limits can lower your credit score. Aim for balances under 35%.
Credit account history:
An established credit history makes you a less risky borrower. Think twice before closing old accounts before a loan application.
Recent inquiries:
When a lender or business checks your credit, it causes a hard inquiry and a slight ding to your credit score. Apply for new credit in moderation.
Types of credit:
A healthy credit profile has a balanced mix of credit accounts and loans.
Now that your question of "how does credit scoring work?" is answered, get your credit report & score.
What Affects Your Credit Score?
Understanding How Credit Reporting Works
Credit Report Scoring
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