HOW MUCH? credit score

Credit score concept.

   
 

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 credit risk.

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.

Closeup of Platinum Card
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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 credit score, improving credit score correcting information on credit report

Related topics: identity theft

 

 

 

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