Secrets of Credit Score Part 5

Credit scores became widely used in the 1980's. Long before credit scores, human judgment was the sole factor in deciding who received credit. Credit scores range from 300 to 850. All three of the credit bureaus Equifax, Experian, and TransUnion offer FICO credit scores using a complex mathematical formula developed by Fair, Isaac and Company, but they each give the scores a different name: At Equifax, the FICO is known as the Beacon credit score; at TransUnion, its called Empirica; and at Experian, it’s called the Experian/Fair, Isaac Risk Model.

Credit scores are based upon statistical models and not opinions. Credit scores computed with statistical models analyze historical data to make the best predictions about the future. Credit Scores & Credit Reports provides the first thorough examination of the all-important, but little understood, credit scoring and credit reporting systems. These articles should enable consumers to understand how both of these systems actually work, and what they can do to improve their FICO scores, and to ensure their credit reports are accurate. Credit scores are based on a person's whole credit picture. No one factor determines a score.

Credit scores are based on the information in your credit report, and each bureau has its own formula for calculating your score. In addition, each lender may have its own proprietary formula for calculating a score. Credit scores are available as an add-on feature of the report for a fee. Credit scores range between 300 and 900, with the average score in the U.S. Most lenders offer lower interest rates to applicants who have scores above average.

Credit scores are fluid numbers that change as the elements in your credit report change. Stay up-to-date with your credit and get unlimited access to your Experian credit report and score with Credit Manager. A higher number means you are more likely to pay back a debt. Credit scores change as the information on your credit report changes, sometimes as often as once a day. Some consumers get caught up in their credit scores and obsess about what they can do to raise them.

Credit scores predict how likely you are to default on a credit account or loan; they’re used to help set interest rates and terms. What you may not know is that credit scores are just the start of the way financial institutions evaluate you, and they’re not even the most commonly used scores — far from it. Credit scores help lenders assess risk more fairly because they are consistent and objective. Consumers also benefit from this method. Credit scores are calculated based on data in your credit reports and, as fluid numbers, change over time, sometimes on a daily basis! That's why it’s so important to stay on top of your credit reports for changes that could affect your credit scores.

Lenders supply the CRAs with information about their customers and in turn have access to credit records. Lenders look at your scores all the time. They look at your scores when deciding, for example, whether to change your interest rate or credit limit on a credit card, or whether to send you an offer through the mail. Lenders realize that many people occasionally pay late. Therefore, being late with a single payment is typically not as harmful as being late with two or more consecutive payments.

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Gurmit loves travelling; he has been over 70 countries. He speaks fluent Cantonese, Polish, Hindi, Punjabi and English. Gurmit is an author, writer, insurance and mortgage expert. He frequently writes on various topics of interest to his readers. Gurmit Singh is a licensed mortgage expert with Dominion Lending Centres Mortgage Villa.

Gurmit Singh, mba
Mortgage Expert
M08009905
Dominion Lending Centres Mortgage Villa (11574)
Email:gurmit@gurmitsingh.ca
Website: http://www.gurmitsingh.ca