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Building Credit Cred: Credit Bureaus

Ok, now that you know that your credit score is basically your financial GPA, you might be wondering who’s doing the grading for this financial report card. Companies called credit bureaus do. They collect information about your financial dealings involving any sort of loan, debt, or billing. In the U.S., there are three such companies: Experian, TransUnion, and Equifax. Each of these companies may collect slightly different information, so the credit report that each provides may be slightly different.

Credit Bureau ChartThe most common credit score used to determine loan eligibility and the interest rate you pay is called a FICO score. FICO is a company that uses statistics and mathematical formulas called algorithms to pack your financial story into a single three-digit number between 300 and 850 indicating how likely you are to repay your debts. FICO isn’t a credit bureau, per se; rather. a firm that analyzes data collected by the credit bureaus and generates a credit score.

As shown in the graph on the right, the average person’s credit score is determined by five factors.