Home > Free Credit Report >
Credit Report Score > Credit Report Score Calculation
Credit Report Score Calculation |
|
A credit report score is an index of your
creditworthiness based on your credit history and it helps the lenders to
decide whether to give a loan to a customer. With the help of this number the lender can gauge the amount of risk that he would have to take if he gives the loan. The credit report score is quicker and less subjective than a credit report and is a system of points, which are based on the information in the credit report. The lenders can make out whether a person will be able to repay a loan and make payments on time by assessing the credit report score. FICO: Most Commonly Used Credit Report Score An independent company, Fair Isaac, with each of the three major credit bureaus (Experian, Equifax and TransUnion) developed the scoring method and software used by banks, lenders, insurers and other businesses in the early 1980s. FICO is the most commonly used credit report score by lenders. Each of the three national credit bureaus has its own version of the FICO score with its own name. Equifax has the Beacon system, TransUnion has the Empirica system, and Experian has the Experian/Fair Isaac system. As all of them are based on the original Fair Isaac FICO scoring method, they produce similar results for any given credit report. There are other scoring methods, which may include information such as your income or how long you have been at the same job. Calculating the Credit Report Score The system of calculating the credit report score is similar to how a teacher works out your grade in school, with the difference that instead of tests, homework and attendance, it uses the information on your credit report. The exact formula for calculation of credit report score is proprietary information owned by Fair Isaac. Given below is an approximate breakdown of how it is determined. 1) 35% of the credit report score is based on your payment history: Basically the lender wants to ascertain how punctual you are in paying your bills. The credit report score depends upon how many bills have been paid late, how many were sent out for collection, any bankruptcies, etc. The timings of the above are also important. If these have happened recently it will have an adverse effect on the credit report score. 2) 30% of the credit report score is based on outstanding debt: The outstanding debt comprising of car or home loans and credit cards at their credit limits determine the credit report score. The more cards you have at their limits, the lower your credit report score will be. The rule of thumb is to keep your card balances at 25% or less of their limits. 3) 15% of the credit report score is based on the length of time you have had credit: If you have had established credit for a long time, more information about your past payment history would be available and this will give a more accurate prediction of your future actions. As such your overall credit report score will be better. 4) 10% of the credit report score is based on the number of inquiries on your report: If you make more applications for a lot of credit cards or loans, the number of inquiries on your credit report will be high. This indicates financial trouble. FICO scores only count inquiries from the past year. Hence the more recent these inquiries are, the worse for your credit report score. 5) 10% of the credit report score is based on the types of credit you currently have: The number of loans and available credit from credit cards you have is important, more so if there is not as much other information on your credit report on which to base the credit report score. It is possible to get instant credit at electronic and department stores if you have a good credit report score. |
|
| ------------------------ |
|---|
|
|
| ------------------------ |
|---|
|
|
|
|
| ------------------------ |
|---|
|
| ------------------------ |
|---|
Custom Search
|
| ------------------------ |
|---|
|
|
| ------------------------ |
|---|
Consumer Alerts | About | Bookmark Us | Contact | Espanol | Privacy Statement | Copyright | Terms & Conditions | Financial Widgets | SiteMap
Copyright © 2006 Credit Loan, LLC. 235 APOLLO BEACH BLVD, STE 218 Apollo Beach, Florida 33572 All rights reserved.
Disclaimer: The content provided on CreditLoan.com is for informational purposes only; do not make any financial decisions based on its content. Financial decisions are personal, based on an individual's situation. Consult with a financial professional before making any financial decisions. CreditLoan.com is not liable for your financial actions.
