When you apply for a loan or credit card, banks check your credit by pulling your credit report from one or more of the three national credit bureaus — Equifax, Experian, and TransUnion — and running the data through a scoring model, usually FICO, to produce a three-digit number between 300 and 850.1myFICO. Understanding FICO Scores That number, together with the underlying account history, tells the bank whether to approve you and what interest rate to offer.
Where Banks Get Your Credit Information
The three nationwide consumer reporting companies — Equifax, Experian, and TransUnion — collect your financial information from thousands of lenders, collection agencies, and public records, then sell it to banks and other creditors during the application process.2Consumer Financial Protection Bureau. Companies List3USAGov. Learn About Your Credit Report and How to Get a Copy Each bureau gathers data independently. Some lenders report to all three, others report to only one or two, so your three reports may not match.
The Fair Credit Reporting Act limits who can access your file. A bank can pull your report when it has a recognized legal reason, such as evaluating a credit application you submitted.4Office of the Law Revision Counsel. 15 USC 1681 – Congressional Findings and Statement of Purpose You can see the same data the bank sees. Federal law entitles you to one free credit report per year from each bureau, and all three have permanently extended a program that lets you pull your report once a week for free through AnnualCreditReport.com.5Consumer Advice (FTC). You Now Have Permanent Access to Free Weekly Credit Reports
The Score Behind the Decision
Once a bank retrieves your raw credit data, it feeds the information through a scoring algorithm — usually FICO or VantageScore — to produce a single number that represents your risk. Standard FICO scores run from 300 to 850, and industry-specific versions like the FICO Auto Score or FICO Bankcard Score use a 250-to-900 range.1myFICO. Understanding FICO Scores Lenders choose which model version to use — FICO 8, FICO 10, FICO 10T, and others — depending on the type of loan and the institution’s risk appetite.
FICO 10T uses trended data, meaning it looks at the direction of your balances and payments over at least the last 24 months rather than a single snapshot. Steadily falling credit card balances look better to this model than climbing ones, even when the current balance is identical.6Experian. What You Need to Know About the FICO Score 10
The Five Things Inside Your Score
FICO breaks its scoring formula into five weighted categories. The exact impact varies person to person, but the approximate weights show what matters most.7myFICO. How Are FICO Scores Calculated
- Payment history, about 35%. Whether you’ve paid your bills on time is the single biggest factor. Late payments are recorded at 30, 60, 90, and 120-plus days past due, and the later the payment, the greater the damage.8Experian. How Long Do Late Payments Stay on a Credit Report
- Amounts owed, about 30%. This is how much of your available credit you’re currently using, often called your utilization ratio. Lower is better.
- Length of credit history, about 15%. A longer track record gives the bank more data to work with.
- New credit, about 10%. Recent applications and newly opened accounts can signal higher risk, especially clustered together.
- Credit mix, about 10%. Handling both revolving credit like cards and installment debt like auto loans or mortgages shows you can manage different repayment structures.
What a Credit Check Itself Does to Your Score
When you apply for a loan or card, the bank requests your full report with your authorization. That request creates a hard inquiry, which other lenders can see. Hard inquiries stay on your report for up to two years but typically affect your score for only about 12 months, and usually by fewer than five points.9Experian. How Long Do Hard Inquiries Stay on Your Credit Report
Soft inquiries don’t affect your score at all. These happen when you check your own credit, when a lender pre-screens you for an offer, when an employer runs a background check, or when a landlord reviews your application.10TransUnion. Hard vs Soft Inquiries – Different Credit Checks Only you can see soft inquiries on your report.
Rate shopping gets special protection. Newer FICO models treat all hard inquiries for the same loan type — mortgage, auto, or student loan — within a 45-day window as a single inquiry. Older versions use a 14-day window.11myFICO. The Timing of Hard Credit Inquiries – When and Why They Matter Do your comparison shopping in a concentrated stretch rather than over several months.
What Banks See Beyond the Bureau File
If you already bank with the institution you’re applying to, it will often look at its own records too. That means average checking and savings balances, whether you’ve had overdrafts or returned items, and how you’ve performed on any existing loans or cards at that bank. Internal history can carry real weight for borderline applicants.
Banks also use specialty reporting agencies. ChexSystems tracks problems with deposit accounts — bounced checks, unpaid fees, suspected fraud — rather than borrowing history. A negative ChexSystems record can make opening a new checking or savings account difficult even when your credit score is strong.
For people with limited credit history, some lenders consider alternative data such as verified rent payments, utility bills, and bank account activity. Both FICO and VantageScore can incorporate rental payment data when it’s available, and programs that report on-time rent to the bureaus are becoming more common. Alternative data is typically included only if you opt in.
How Long Negative Items Stay Visible
Federal law caps how long different types of negative information can appear on your report. Once the period expires, the bureau must remove the item.
- Late payments, collections, and most adverse items: seven years from the date of the original delinquency.12Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports
- Bankruptcies: ten years from the date the court entered the order for relief, whether the case was filed under Chapter 7 or Chapter 13.12Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports
- Paid tax liens: seven years from the date of payment.12Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports
- Civil judgments: seven years from the date of entry or until the statute of limitations expires, whichever is longer. In practice, the three major bureaus largely removed civil judgments and many tax liens from credit reports beginning in July 2017 after adopting stricter verification standards.
Medical debt is handled separately. In April 2023, the three major bureaus voluntarily stopped including medical collections under $500 on credit reports, and they remove paid medical collections once settled.13Consumer Financial Protection Bureau. Consumer Credit and the Removal of Medical Collections From Credit Reports A broader CFPB rule that would have banned all medical debt from credit reports was vacated by a federal court in July 2025, so unpaid medical collections of $500 or more can still appear.14Consumer Financial Protection Bureau. Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information – Regulation V
Paying a collection account doesn’t automatically remove it. The entry typically stays for seven years from the original missed payment, though it will show as paid. Newer scoring models — FICO 9, FICO 10, FICO 10T, and VantageScore 3.0 and 4.0 — ignore paid collections when calculating your score. Older models like FICO 8, which many lenders still use, do count paid collections against you.15Experian. How Do I Get a Paid Collection Off My Credit Report
Your Rights When a Bank Checks or Acts on Your Credit
If a bank denies your application, offers worse terms than you asked for, or takes any other negative action based on your credit report, it must send you a written notice within 30 days.16Consumer Financial Protection Bureau. Regulation 1002.9 – Notifications The notice has to tell you which credit bureau supplied the report, make clear that the bureau did not make the decision, explain your right to request a free copy of your report within 60 days, explain your right to dispute inaccurate information, and give you the credit score if one was used.17Federal Trade Commission. Using Consumer Reports for Credit Decisions – What to Know About Adverse Action and Risk-Based Pricing Notices
Spot an error? File a dispute directly with the bureau. The bureau generally must investigate within 30 days and notify you of the results within five business days after finishing. If you filed the dispute after receiving your free annual report, the investigation window extends to 45 days.18Consumer Financial Protection Bureau. How Long Does It Take to Repair an Error on a Credit Report If the investigation results in a correction, the bureau must give you a free updated copy of your report.19Federal Trade Commission. Disputing Errors on Your Credit Reports
You can also cut off access before anything goes wrong. A credit freeze blocks new creditors from pulling your report entirely, which stops anyone from opening accounts in your name. Placing and lifting a freeze is free under federal law, and if you request it online or by phone, the bureau must place the freeze within one business day and lift it within one hour.20Consumer Advice (FTC). Free Credit Freezes and Year-Long Fraud Alerts Are Here You’ll need to lift the freeze temporarily when you want to apply for credit yourself.
If you suspect fraud but still want creditors to be able to reach your file with extra verification, place a fraud alert instead. An initial fraud alert lasts one year and is renewable.21Consumer Advice (FTC). Credit Freezes and Fraud Alerts A fraud alert only requires creditors to take reasonable steps to verify your identity before extending new credit; it does not block access outright.