by Diamond Channing

Created on: May 02, 2010   Last Updated: May 04, 2010

A credit score is a three digit number represented on your credit report. Your score, along with the contents of your credit report gives a lender a good picture of your credit worthiness. Lenders take your credit score into consideration when determining whether or not they will offer credit. Lenders will also take your credit score into account when determining what the interest rate will be on a loan. Credit scores were first introduced in the early 1950's, however more emphasize has been placed on an individuals score in the last couple of decades.

Before there were credit scores, lenders looked at each application on an individual basis to determine the credit worthiness of the applicant. This enabled the lender to determine if they would grant the requested loan. A lender might have denied credit due to adverse marks on ones credit report for things such as being late on payments or having too much debt. This was a time consuming task since each application was physically reviewed by the lender.

Many times, human judgment made errors in deciding if someone was or was not credit worthy. Today, the credit score is used to assist lenders with accessing the possible risk of an individual not repaying the loan. Consumers also benefit from this process. Your credit score only reflects the likelihood of your ability to repay debt. This is based on your past credit history as well as your current credit situation.

There are several factors taken into consideration when determining what your credit score is. These factors include total debt, type of accounts, and the number of times you have been late with payments.

It is essential you understand how credit score factors work with determining what your individual score will be. This will help you to improve your credit. These factors help you in understanding what items you must address so you may prove creditworthiness over time.

The following numbers represent the ranges in credit scores.

If you have a credit score of 720 and above, this is equivalent to an A+.

If you have a credit score of 700 - 719 = A

If you have a credit score of 675 - 699 = A-

If you have a credit score of 620 - 674 = B

If you have a credit score of 560 - 619 = C

If you have a credit score of 500 - 559 = C-

If you have a credit score of 499 and below = D

A credit report shows how you have managed your financial responsibilities over a length of time. Negative information will fall off the report over a certain amount of time and the positive

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