In many countries a new credit is determined based on your annual income, any late or unpaid credits, and if you can afford the additional credit. Much in the way American banks did it 20 years, or so, ago.
Today we have the credit scores. The score system in United States is somewhat unique. Many will say it is complicated and that it lacks transparency. The three major credit bureaus, Equifax, Experian, and TransUnion, could all give you different scores. To learn how they scored you, you typically have to pay them.
Sure, you can get your free annual credit report from each of the three major bureaus, but you will not see any scores.
What makes it even more complicated is that each bureau has several different scores for different purposes and calculated different ways. The questions is if these score actually says anything reliable about an individual.
Immigrants to the United States, for example, may be quite well-off, have a steady job, high income, and savings. They can still be denied a loan or a credit card because of low credit scores. It is like a Catch 22. Without that first loan or credit card your credit score stays low.
More transparency is, however, unlikely to happen because credit scoring is a business. It is not in their interest to let you and me know exactly how the scores are calculated.
Are there any alternatives?
No, not really. Even if you can get a credit score for free at sites like Credit Karma.
Credit Karma thinks that free access to your credit score is a fundamental consumer right. You can get their free credit score with no hidden costs or obligations.
The way Credit Karma makes money is having you visit their site and offer you various credit and finance content, including advertising. You will find credit simulators, free credit scores, credit advice, and credit score comparisons. As a new driver, you can also find auto loan reviews and car insurance reviews.
Credit Karma base their score on the TransRisk credit score generated from national credit bureau TransUnion, the VantageScore, and the TransUnion Auto Insurance Risk Score.
The site is worth a visit. Their credit score gives you a good idea about your credit health. You should, however, keep in mind that these scores are not typically the scores lenders use.