Credit score is a number which lenders use to assess
the risk of extending credit to you.
In other words, credit score is an estimate of the risk that
a bank will take to lend you money. It is also a snapshot of your
credit file at a certain point in time.
The FICO score is developed by Fair Isaac Corporation
and based on credit files maintained by consumer credit reporting
agencies. It is widely used by banks, credit unions, insurance
agencies, financing companies and other lenders. However, it is
not the only factor determining your ability to obtain credit.
Other important factors include: income, employment history, previous
and current relationships with a lender, to name a few. Each lender
decides on its own what will be taken into account when it considers
lending money to you.
Credit score is a mathematical formula which takes into
account many different pieces of information and compares it with
hundreds of thousands of other credit reports from the past, to
create patterns, which identify statistical possibility of future
Every person with a credit file has three credit scores based
on information from three credit bureaus.
They are not exactly the same, but for most people they will
be only slightly different.
If your credit report does not contain enough information, your
score cannot be calculated as there aren't enough “items”
to be compared with generated patterns. In that case, a different
formula is used to provide your credit rating to a lender.
It is important to remember that while most lenders use
FICO score, they decide what score is acceptable for a particular
loan or credit product along with other information.
© iStockphoto.com - svanhorn
For example, a certain credit score might be too low
for one bank to approve and open a new credit
card account, but high enough for another bank to do so.
More about this topic: FICO
credit score from MyFICO.com
See also: credit
reporting agencies, online
credit report, calculating
improving credit score correcting information
on credit report
Related topics: identity