What is a credit score?

Answer 1

Credit ScoresFor years, creditors have been using credit scores to determine if you'd be a good risk for credit cards and auto loans. More recently, credit scores have been used to help creditors evaluate your ability to repay home mortgage loans. Here's how scoring works.

Scoring is a system creditors use to help determine whether you will be able to pay your future bills on time.

Information about you and your financial experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your application and your credit report.

Using a statistical program, creditors compare this information to the past performance of consumers with similar profiles. A scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit an application. To get copies of your report, contact the three major reporting agencies, Equifax, Experian (formerly TRW), and Trans Union.

A credit score is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals.

To develop a credit score model, a creditor selects a random sample of its customers, or a sample of similar customers if their sample is not large enough, and analyzes it statistically to identify characteristics that relate to creditworthiness.

Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good risk. Each creditor may use its own scoring model, different scoring models for different types of loans, or a generic model developed by a scoring company.

Under the law, a credit score may not take into account certain characteristics � such as race, sex, marital status, national origin, or religion � as factors. However, creditors are allowed to use age in properly designed scoring systems. But any scoring system that includes age must give equal treatment to elderly applicants.

Answer 2

A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information, typically sourced from credit bureaus. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system. Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, employers, and government departments employ the same techniques. Credit scoring also has a lot of overlap with data mining, which uses many similar techniques.

Ned Phillips has had a Visa Card through Pioneer/Trust Bank for 3 years and

Answer 3

A credit score is a number associated with your credit report which tells potential lenders how reliable you are likely to be. It is also referred to as a FICO score because it was developed by th Fair Isaac Corporation. You credit score is made up of five factors which each have a weighted percentage assigned to them. They are as follows: payment history, 35 percent; amounts owed, 30 percent; length of credit history 15 percent; new credit, 10 percent; and types of credit used, 10 percent. You will be assigned a number between 300 and 800 based on this criteria.