Credit Scoring

What is a Credit Score?

A credit score is a three-digit number ranging from about 300-850 that reflects your credit risk level. It is a snapshot of your credit risk at a particular point in time and is calculated using a mathematical equation with information from your credit report. Lenders use your score to evaluate your creditworthiness in a consistent and objective way; it helps them to decide whether to give you the loan or credit card. Consumers like it because no matter who you are as a person, your score only reflects your likelihood to repay debt responsibly. Typically a higher number indicates a lower risk, so the higher the number the better.

FICO (Fair Isaac Company) is the most commonly used. Your score may be different from lender to lender depending on the scoring model that was used. In addition, your credit score for an auto loan may be different from your score for a mortgage. Also, a credit score is a fluid number and changes as information is updated to your credit file. You could have three different credit scores from the three major credit bureaus (Equifax, Experian, TransUnion) because the bureaus do not share the same information. Also, a FICO score will have a different name at each of the these credit bureaus:

CREDIT REPORTING AGENCY		FICO SCORE
Equifax		BEACON®
Experian		Experian/Fair Isaac Risk Model
TransUnion		EMPIRICA®

 

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