It’s your right to know what credit scoring agencies are saying about you. Finding out this information is doesn’t cost a lot and takes only minutes to do – which may be time very well spent.

So what is credit scoring?
Simply put, credit scoring is a method of assessing the credit risk of a loan applicant. It uses mathematical models to evaluate a person’s credit worthiness based on their credit history and current credit accounts. The system was first developed in the 1950s, but has come into widespread use in just the last couple of decades.

In the early ’80s, the three major credit bureaus (Experian, Equifax and Trans Union) each developed scoring models that allowed them to offer a score based solely on the data of one individual. Creditors, especially those in the home mortgage industry, frequently use these scores when deciding who gets a loan and at what rate. However, it’s worth remembering that creditors also consider other information, such as your salary or employment history, when making loan decisions.

What’s in a score?
Credit scores are reported as a number, usually in the 300-900 range. The higher the number the better the score. Creditors see the number as an indicator that an individual will repay a loan. Typically, scores are determined by reviewing the following data:

• Your history of late payments
• Non payments
• Current level of debt
• Types of credit accounts
• Length of credit history
• Number of credit inquiries
• History of applying for credit
• Bad credit behavior, such as writing bad checks

Personal details such as race, gender and religion are definitely not considered when determining your score. It’s also worth noting that each major credit bureau has its own method for calculating credit scores. However, the scoring models have been fairly well standardized so that a “600″ score at one bureau is roughly the equivalent to the same score at another.

What’s a good score?
Overall, a score of 650 or above is a sign of very good credit, and a very good credit score. People with scores of 650 or higher will, all things considered, have a good chance of obtaining quality loans at the best interest rates.

Scores of 620 to 650 indicate good credit, but also may point to potential trouble areas that creditors will want to look at and review. A lender may require additional documentation before a loan will be approved.

With scores of below 620, consumers may find that they can still obtain a loan. However, the process will be lengthier and more involved, as creditors consider scores below this threshold to be an indicator of greater credit risk.