Creditors often don’t have time to review every applicant’s entire credit report. That’s why credit bureaus use a process called credit scoring, or credit modeling, to evaluate the risk you pose to a potential creditor. Each bureau uses software to calculate your credit score, or FICO score, based on five main criteria:

• Your payment history, and specifically whether you pay on time
• The total amount you owe
• The length of your credit history
• The amount of new credit you have
• The types of credit you use

The top 20% of credit reports that are evaluated receive scores of 780 or higher, while the lowest 20% receive scores under 620.

Different lenders set different standards for what qualifies as an acceptable score. Once you qualify, lenders will use your score to determine which interest rate to offer you. Prime rates are lower and go to applicants with high scores, and higher rates go to sub-prime borrowers, or applicants with low scores.

If your application for credit is denied, you may ask your lender why. Credit bureaus are required to provide up to four reasons for your score.