Credit Score 101: What Is Credit Scoring?

Understanding Credit Scoring: How Your Financial Profile Impacts Credit Decisions

Credit scoring is a system that creditors use to help determine whether to give a person credit or not. According to the Federal Trade Commission (FTC), it may also be used to decide the terms a person is offered or the rate that person will pay for a loan.

What type of information is collected from a credit report?

  • Bill-paying history
  • Number and type of accounts
  • If a bill is paid by the date they’re due
  • Collection actions
  • Outstanding debt
  • Age of accounts

Using a statistical program, creditors compare this information to the loan repayment history of consumers with similar profiles, FTC explains. A credit scoring system, for example, awards points for each factor that helps predict who is most likely to repay a debt pacific dreamscapes. A total number of points — a credit score — helps predict how creditworthy a person is or how likely is that person going to repay the loan and make the payments when they’re due.


Credit scoring plays a pivotal role in creditors’ decisions regarding extending credit and determining loan terms. The Federal Trade Commission (FTC) outlines the key information collected from credit reports, including bill-paying history, account types and numbers, payment timeliness, collection actions, outstanding debt, and account age. Utilizing statistical programs, creditors analyze this data in comparison to the repayment histories of consumers with similar profiles. This process results in a credit score, which serves as a predictive tool for assessing an individual’s creditworthiness and likelihood of timely loan repayment. Understanding these factors is essential for making informed financial decisions.

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