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Personal and Business Banking

Credit Scores

Credit and Credit Management

  • Summary
  • Article

Credit Scores


  1. What credit scores are
  2. Who calculates them
  3. Why lenders use them
  4. How they are calculated
  5. What goes into them
  6. How scores can be improved
  7. What you can do to keep your credit score in good shape

Credit Scores

When you borrow from any lender or use any company that bills you for services, paying your obligations as you originally agreed has a big impact on your future access to credit and the rates you will pay. When you apply for a loan, the lender is permitted to view your credit report on file at the major reporting agencies. These reports show how you've handled credit in the past. In exchange for access to this information, lenders are required to regularly report how you're performing on your current obligations.

All the credit reporting agencies maintain a credit score for you based on the information in your credit report. Credit scoring uses historical data across a broad spectrum of borrowers to predict the statistical likelihood that a borrower will make late payments, stop paying altogether, or declare bankruptcy. That likelihood translates into a numerical credit score. Lenders may use that score, in addition to the information on your application and other factors, to determine the loan rate you will receive, the types of loans you may qualify for, and the amount of any loans.

In addition, auto insurers, landlords, and employers may also use your credit score to determine your insurance premiums, whether they will offer insurance to you, whether you'll be a reliable renter, and if you are a responsible person to hire.

The use of credit scoring information can vary widely from institution to institution depending on how much credit risk they are willing to accept. Federal regulations affecting credit scores help to ensure that rates for loans are fairly assigned and not discriminatory. For example, if an institution uses a credit score to assign loan rates, everyone with that score must receive the same rate.

DCU uses credit scores to determine the rates members receive on many types of consumer and home equity loans.

Here are a few common questions about credit scores:

  1. What is a credit score?

    A credit score is a snapshot of your credit risk picture at a particular point in time stated as a number. Credit scores can range from 300 to 850. The higher the score, the better. It changes as information is added, changed or removed from a credit report. There are many scores and score models available to lenders. DCU uses the Fair, Isaac & Co. (FICO) score.

  2. Who calculates credit scores?

    A credit score is calculated by the credit reporting agency using the Fair, Isaac score model.

  3. Why do lenders use credit scores?

    Credit scores give a fast and objective measurement of credit risk. Credit risk refers to the risk to the lender that the borrower will not repay the loan as agreed. Borrowers who make late payments or don't repay everything they owe are an expensive problem for all lending institutions. The extra costs and losses involved make borrowing more expensive for everyone.

  4. How are credit scores calculated?

    A credit score is calculated by a mathematical equation that evaluates many types of information from a credit report. By comparing this information to the patterns in hundreds of thousands of past credit reports, the score predicts the future level of credit risk.

  5. What is in a credit bureau score?

    Credit bureau scores are based on five main categories of information in a credit report which, added together, total your credit score. They are, in order of importance:

    1. Payment history – What is the track record? This represents 35% of the score.

    2. Amounts owed – How much is too much? This accounts for the next 30%.

    3. Length of credit history – How established is the history? This represents 15%.

    4. New credit – Is more debt being taken on? This is 10% of the total.

    5. Types of credit in use – Is it a healthy mix? This is the final 10% of your score.

  6. How can a credit score be improved?

    1. Pay bills on time. Delinquent payments, collections, legal judgments, and bankruptcy all have a negative impact on a score.

    2. Keep balances low on credit cards and other "revolving credit". High outstanding debt can affect a score.

    3. Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix. It probably won't raise a score and may actually lower it.

    4. Pay off debt rather than moving it around. Also don't close unused cards as a short-term strategy to raise a score. Owing the same amount by having fewer open accounts may lower a score.

    5. Make sure credit report information is correct. It doesn't affect a score to request and check a credit report. If errors are found, contact, the credit reporting agency and the lender.

  7. What do the credit reporting agencies call the FICO score?

    The major agencies have their own names for the score:

    • Equifax – Beacon

    • TransUnion – Empirica

    • Experian – Fair Isaac Score

Another great way to start learning more about what shape your personal credit is in is by signing up for DCU's FICO Credit Score Service – free with FREE Checking.

Your score depends on you

The way you manage money and debt plays an important role in forming your credit score. The three major credit reporting agencies (Equifax, Experian, and TransUnion) calculate your credit score based on the information they collect about you from financial institutions and credit card companies, including payment histories and how much money you owe. They also look at public records such as bankruptcy filings and tax liens. Your credit score, which is based on your credit report, constantly changes and can go up or down based on your spending and ability to make payments on time. Credit scores fall between 300 and 850, and people who score 720 or higher will typically qualify for the lowest interest rates when they apply for loans. People with low scores typically pay much higher rates if they can get approved at all.

Smart credit management

Federal law allows you a free, once-a-year look at your credit report. You can order your free report from the Annual Credit Report Request Service. Simply go to, a web site sponsored by all three major credit reporting agencies. You can also call 877.322.8228 to request your free report. If you would like assistance reading your report, DCU offers BALANCE counseling. For a additional fee, you can order your credit score. To keep your credit score worthy of an A+, apply for new credit cards sparingly and make payments on time (DCU's Bill Payer can help you make payments on time, online! You can even set up automatic payments from your savings and checking account. Just be sure to balance your checking account too.). Also consider DCU's BALANCE service to help you manage money wisely and improve your credit score.

Free for DCU Members
BALANCESM Financial Fitness Program

Managing money is a serious task. Just about everyone could benefit from knowing more about handling income, using a budget, and reading a credit report. As a DCU member, you have access to BALANCE, a financial education and counseling service dedicated to helping you achieve your goals. BALANCE offers unbiased, general advice as well as in-depth financial counseling. Here are some of the ways BALANCE can assist you:

  • Teaching skills for balancing your checkbook, buying a home, and setting goals.

  • Reviewing your credit report.

  • Negotiating with creditors and creating a debt management plan.

  • Preventing bankruptcy.

BALANCE also has a financial education resource center at, where you can access information about housing, credit and debt management, investing, taxes, and more. It may help you find answers to some immediate financial questions.

For Personal Assistance

It's never too late to develop smart financial habits. To speak with a BALANCE counselor, call 888.456.2227. Counselors are available Monday through Thursday, 8 am to 11 pm (Eastern Time), Friday 8 am to 8 pm, and Saturday from 11 am to 8 pm.