A credit score is a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports. Your credit score serves as your keys to not only financial products like credit cards and loans, but also rental properties as a tenant. Oftentimes, employers and other important organizations will also look at your credit score. Lower scores means you will often receive higher interest while the opposite remains true for a higher credit score.
Organizations and lenders use credit scores because they are consistent and objective. Rather than doing a full report on a borrower's background, this is a simpler way to evaluate a person's credit. Also, credit scores only reflect your likelihood to repay debt responsibly based on your past credit history and current credit status meaning it is built by your own history.
Generic credit scores are used by many types of lenders and businesses to determine general credit risk. You can access your generic score as one score using the same formula across all three credit reporting agencies.
Custom credit scores are developed for use by individual lenders. They rely on credit reports and other information, such as account history, from the lender's own portfolio. They are unique to the specific business, or they may be used by specific types of lenders, such as credit unions. Custom credit scores can apply to specific types of lending, such as mortgage lending or auto lending.
Credit score factors are elements that can shape your credit report such as total debt, types of accounts, number of late payments, and the age of accounts. These factors indicate what elements of your credit history most affected the credit score at the time it was calculated. They also tell you what you must address in your credit history to become more creditworthy over time. Monitoring your credit on a regular basis can help you keep a close eye on how these factors are affecting your score and what you may be able to do to improve your score.
A generic credit score is based on credit history: number of open accounts, total levels of debt, repayment history, and other factors. The three companies: Experian, Transunion, and Equifax are the main credit reporting companies under the Fair Credit Reporting Act. Although Experian is the largest credit bureau in the United States, TransUnion and Equifax are widely considered to be just as accurate and important. Your score is the average of the three reports from each company. The scale for each company differs but overall, they combine to create a credit score on the scale from 300 - 850.
Experian: 330 – 830
Transunion: 300-850
Equifax: 280-850
300 - 640: poor
640 - 690: fair
690 - 740: good
740+: excellent
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