Good Credit Report Score A Boon For You |
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The credit bureaus that issue the credit report score have different evaluation systems, each based on different factors. A credit bureau may consider personal or demographic aspects, such as income, savings, age, and marital status. Because the scoring systems are based on different criteria, which are weighted differently, the three major credit bureaus in the U.S. can issue differing credit scores for the same individual, even though the credit report scores are based on the same credit report information. A credit report score can be considered your detailed financial history; and at the same time, an objective summary of that information. It represents your worthiness as a borrower. Numerical weights are placed on different aspects of your credit report and a mathematical formula or computation is used to arrive at a final score. There are literally thousands of score models used in the credit industry which consider different variables for different types of credit. Credit bureaus offer several different types of credit report scores in their product portfolio, appealing to the vast array of creditors and credit applications in the country. Credit report score is one of the primary criteria a creditor uses while determining the risk in lending money to you. Creditors use scores, among other things, to determine whether or not to grant you credit and, if they feel they can, what will be the amount of that credit and at what rate. Creditors will also access and consider your credit report, which can provide further substantiation on a given component of a credit report score that could affect their final decision. However, a credit report score is most often used when it comes to making most credit decisions. While most consumers are aware of the importance of credit report scores and the very fact that their creditworthiness is tracked on something called a credit report, few are aware of its details. The credit report score is also known as a FICO score, was developed by Fair Isaac & Co. to evaluate the likelihood of the consumers paying their bills. According to Equifax, credit report score ranges from a low of 300 (highest risk) points to a high of 850 points (lowest risk) and is used as the deciding factor on more than 75% of credit applications. Equifax is one of the three major credit bureaus in the United States. In 2003, nearly 50% of Americans had a credit report score between 700 and 800. In determining the credit report score, mathematical models are used to analyze the data on an applicant's credit report, taking into consideration five factors namely, previous credit performance; current level of indebtedness; time for which credit has been in use; types of credit available; and pursuit of new credit. All factors such as payment history, the length of time an individual has had credit and the individual's employment history play a role in determining your credit report score. So, even though a consumer does not have an excellent source of income, he must pay all his bills on time and in full. And if he doesn't have a mortgage, car payments or revolving debt of any kind, it is unlikely that his credit report score will be 850. Most credit report scores that are available free on the Internet or with some payment are not the exact ones used by lenders. The credit report score called a FICO, named after the San Rafael, Calif.-based Fair Isaac Corp is the model most widely used by lenders. It is a mathematical model designed to predict the credit risk of the consumers based on information in their credit report. Since a few years, it has become possible for consumers to buy their credit report score, three-digit numbers that are generated using information from their personal credit files. The higher the score, the better are your chances of getting a credit from the lenders. A high score often translates into better rates on the money you borrow. At the same time, it is important that you pay your bills consistently, check your credit report and remove any errors. You must also keep your debt reasonable and maintain only a reasonable amount of unused credit. |
