The calculation is based on your credit report using complex algorithms. It will consider various factors from an individual's credit report, including payment history, credit utilization, length of credit history, types of credit accounts, and recent credit inquiries.

A credit score is a numerical value representing your creditworthiness. In contrast, a credit report is a detailed document outlining your credit history — the report record all the information related to your credit activity. And the credit score calculating models generate credit scores based on your credit report.

The three major credit bureaus (Equifax, Experian, and TransUnion) manage your credit report. By visiting AnnualCreditReport.com, you can get a free credit report annually through AnnualCreditReport.com. Then you can calculate your credit score with the help of financial institutions, credit card issuers, and personal finance websites.

You have multiple credit scores. This is because three major credit bureaus develop their credit scores based on credit history. Additionally, several credit scoring models, such as FICO and VantageScore, calculate scores differently. As a result, you will get more than one credit score generated based on the various models and reports.

A higher credit score increases your chances of being approved for a personal loan and securing lower interest rates. If you have a good score, lenders will take you as a lower risk, which can also bring your better rates and other conditions.