Your credit score is a measure of the likelihood that you will pay your debt as agreed. The lower your credit score, the more likely you are to default on your debt. Borrowers with higher credit scores represent a lower risk to the lender.

Most lenders rely on your credit score to determine eligibility for private student loans. Your credit score can also affect the cost of your debt, with lower interest rates and fees reserved for borrowers with better credit scores. This is in contrast to federal education loans, which generally do not depend on your credit score.

Every lender uses a slightly different credit scoring formula that represents its own and industry experience. This may be adjusted according to the type of credit you are applying for. So every credit application could generate a different credit score.

Credit scoring is designed to predict how likely you are to repay a loan and to make your repayments on time. Over the years, automated credit scoring has proved to be more accurate and consistent than subjective human judgement. Credit scores range from 0 to 999. A higher score suggests that you will probably find it easier to borrow money or buy goods on credit. Knowing your existing credit score could help you take steps to improve it.

Every loan application or "inquiry" has the potential to reduce your credit score. According to Fair Isaacs, the company that produces the FICO score used by most education lenders, one "inquiry" will generally result in a 5 point reduction in the FICO score. However, since people with six or more inquiries are eight times more likely to declare bankruptcy than people with no inquiries, it is best to keep the number of inquiries small. Also, if your credit history is short or involves very few accounts, an inquiry is likely to have a bigger impact.

On the other hand, the credit reporting agencies do account for "shopping around" behavior for auto loans and mortgages, but not for education loans. When you apply for a mortgage or auto loan, they ignore any current inquiries within the 30 day period prior to scoring and treat any past inquiries within a short period of time (e.g., 14 or 45 days, depending on the version of the FICO score) as a single inquiry. This compensates for the impact of shopping around. They do not say whether applying for different types of loans (e.g., credit card, mortgage, student loan) counts as separate inquiries even if they are within the shopping around window, but that is likely the case. So the best advice is to apply for all your mortgages and auto loans within a short time period (e.g., a week or two) and to not apply for too many loans.

A Creditcrunchcreative is important for many reasons; it determines how much you will pay in interest on loans and whether you will be able to get a loan or not. If you have a poor credit score you will pay more on loans than someone with a good credit score.

There are many factor that go into calculating your credit score, like number of late payments, length accounts have been open, bankruptcies, inquiries, and several other factors. This credit score is called a FICO score and it is compiled by Fair Isaac and Company. There are three major agencies that monitor your debts and payments; they organize the facts about your history in this department and tally a score. These companies are independent from each other, so the information that each one has can be different.

For the same reason, you may have different credit scores issued by each company. Different lenders choose to work with different credit reporting companies. Some lenders work with only one, while others work with all three and consider all three reports and scores in the loan decision. FICO scores run between 300 and 850 points. Because there is only 550 points between the lowest score and the highest score, small changes can have a big impact on your loan options and other aspects of your life.