A credit score is a number that reflects your creditworthiness at any given time. Typically the higher your score the better your credit. Individuals with higher credit scores typically can obtain mortgages, credit cards, loans and insurance with better terms. The lower your score the worse your terms are on any offer. The Credit Score is based on the information stored with in your credit report.
Each Bureau has its own score
Each Bureau has its own name for the FICO® Score.
Equifax – Beacon
TransUnion – FICO Classic
Experian – FICO Risk Model
The general scoring ranges between 300 – 850. Fair Isaac divides the scores into five categories.
780 – 850 – Low Risk
740 – 780 – Medium – Low Risk
689 – 740 Medium Risk
620 – 690 – Medium High Risk
620 – and Below – High Risk or “sub-prime.”
A credit score can change quickly for several reasons, including late payment or big increases in credit card balances. Each credit bureau may not have identical information about you, in large part because some creditors only report to one or two bureaus instead of all 3. This results in different credit scores amongst the credit bureaus. Some insurers and creditors use there own formula to calculate score in conjunction with the FICO score model. For example one lender might emphasize more on payment history within the credit report, where another lender might focus on something totally different within your report. A credit score itself might be the determining factor of better rates and terms with other creditors. But in the insurance context, the “credit-based insurance score, “typically is on of the many factors determining whether a policy is underwritten or at what premium. Most lenders and insurance companies scan your credit report for derogatory terms like bankruptcy, judgments, foreclosures, and collections.
How is a credit score calculated?
Factor 1: Payment History (35%)
Factor 2: Amount Owed – Extent of Indebtedness (30%)
Factor 3: Length of Credit History – The Longer, The Better (15%)
Factor 4: How Much New Credit? (10%)
Factor 5: Type of Credit (10%)
CreditScoreQuick.com
