By: HowStuffWorks.com Contributors
3 min
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About This Quiz
A credit score may be the most important number that relates to your financial future. Loans for cars or houses, rental agreements and even insurance premiums all depend on your credit score. But what does the number actually represent, and how can you best improve your credit score? Take this quiz to find out.
How many digits are in your credit score?
one
two
three
Correct Answer
Wrong Answer
Your three-digit credit score is not representative of one thing, but rather is calculated from a number of different factors that could affect your credit worthiness.
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Why were credit scores originally not disclosed to consumers?
too confusing
to ensure its accuracy
to save money
Correct Answer
Wrong Answer
Without an explanation of what it means and what creditors want, the score is just an incomprehensible number.
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When did credit scores first become available to consumers in the United States?
1989
1996
2001
Correct Answer
Wrong Answer
Consumer rights organizations and even the U.S. Congress pressured the credit reporting agencies to disclose this previously secret information.
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What does the term FICO stand for?
Fair Isaac Corporation
Financial Investigation Commentary
Fixed Income Credit Organization
Correct Answer
Wrong Answer
Fair Isaac Corporation was the company that developed the credit score used by the major credit bureaus.
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How many major U.S. credit bureaus are there?
two
three
five
Correct Answer
Wrong Answer
The three major credit bureaus in the U.S. are named Experian, Equifax and TransUnion.
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What is the range of FICO credit scores?
0-100
1-500
300-850
Correct Answer
Wrong Answer
The score is drawn from various facts that are written on your credit report, weighted via a proprietary formula.
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What aspect of your credit report weighs most heavily in determining your credit rating?
payment history
outstanding debt
cash on deposit
Correct Answer
Wrong Answer
Since credit scores are most used to determine the likelihood that you will repay a debt, it is logical that payment history would be the most important element of the score.
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At what percentage of your available credit should you ideally keep your credit card accounts?
25% or less
0.4
0.65
Correct Answer
Wrong Answer
The smaller percentage of your available credit that remains unpaid at any given time, the worse your credit score will be.
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Why does a longer credit history translate into a higher credit score?
because more information means greater accuracy
because you have more time to lower your outstanding debts
because it indicates greater financial responsibility
Correct Answer
Wrong Answer
Lenders are not looking to weed out as many potential customers as possible. They simply want to have an accurate picture of your reliability as a borrower.
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What is a soft inquiry on your credit report?
checking your own score
multiple inquiries by different lenders within a short span of time
a request for credit below $1,000
Correct Answer
Wrong Answer
Hard inquiries are those by lenders investigating your credit, and negatively affect your score for a short time. Soft inquiries do not affect your credit rating.
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If you have multiple different types of credit accounts, what affect will that have on your credit score?
positive
negative
neutral
Correct Answer
Wrong Answer
You will be considered a less risky borrower if you have positive experience with different types of loans, rather than just one.
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What is the BEACON system?
one credit bureau's application of the FICO number
an upstart scoring system that is a challenge to FICO
a system of applying your FICO score to determine the likelihood that you will default on a loan
Correct Answer
Wrong Answer
Each of the three major bureaus has their own system that is based on the original FICO score. BEACON, for example, is used by Equifax.
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What is the relationship between credit score and interest rate on a loan?
A higher credit score gives you a lower interest rate.
A higher credit score gives you a higher interest rate.
The two are unrelated.
Correct Answer
Wrong Answer
If your credit score is higher, you are considered a less risky borrower and are rewarded with a lower interest rate.
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In addition to your FICO score, what else might raise your interest rate on a loan?
the length of the loan repayment schedule
the size of the loan
where you live
Correct Answer
Wrong Answer
A longer repayment schedule usually translates into a somewhat higher interest rate.
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Why are insurance companies interested in your credit score?
People with lower credit scores are more likely to file insurance claims.
They want to know how likely you are to upgrade your insurance plan.
People with higher credit scores are typically in better health.
Correct Answer
Wrong Answer
While a credit score has no direct connection with insurance claims, insurance companies have noticed the two are correlated.
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What is the result of universal default?
A default on one loan can affect the interest rate of another.
A default on a loan can prevent you from ever getting credit again.
A payment that is over 60 days late can place the entire loan into default status.
Correct Answer
Wrong Answer
Due to this controversial practice, a credit card that is paid consistently on time might still see a dramatic rise in interest rate due to a default on a completely different loan.
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If you want to improve your credit score, what should you do with an old account that you no longer use?
Keep it, even if you don't plan to use it.
Close it.
Start using it at least once every three months.
Correct Answer
Wrong Answer
By maintaining an old account, even if you never use it, you are improving your debt-to-credit limit ratio, one of the factors that determine credit score.
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What single action can most improve your credit score?
consistent on-time payments
reduced credit balances
opening new credit card accounts
Correct Answer
Wrong Answer
Since payment history is the largest factor in determining your credit score, improving this aspect of your credit history will have the greatest impact.
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If you are shopping for the best rate on a loan, what should you do to ensure that your credit score won't be negatively affected?
Make sure all inquiries happen within a few weeks of each other.
Ask the lenders to not check your credit score until you decide to take out the loan.
Limit yourself to no more than three potential lenders.
Correct Answer
Wrong Answer
If all the credit inquiries occur within a short span of time, they will be considered as a single inquiry for credit score purposes.
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What is different about the FICO '08 formula of credit scores?
It does not reward those who are listed as authorized users on the accounts of others with healthy credit.
It prevents insurance companies from applying FICO scores to their premium rates.
It no longer takes into account the number of recent inquiries for your credit.
Correct Answer
Wrong Answer
This practice was previously a way that someone with bad credit could slowly improve their score. It is no longer effective, however, with companies that follow the FICO '08 formula.
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