Credit Scores
Credit Scores
Every consumer has a credit score, this does not appear on your personal credit report when you order it. A company called Fair Isaac Incorporated (FICO) developed this score. This is a summary version of a consumer’s credit report. Fair Isaac does not compile the information, but the model for the score requires the information in order to output a score. The credit reporting agencies pay Fair Isaac Inc. for their score model. Some credit reporting agencies have their own score models that they provide the consumer rather than providing a FICO developed score. Most financial institutions will be using the FICO developed score when making decisions about your creditworthiness. When you apply for credit, financial institutions will review your credit report and will also receive your credit score. Different factors affect this score such as whether you pay on time. Only Fair Isaac Inc. knows the exact components that go into calculating the score and it is doubtful that they will disclose it and for the credit score that the Credit Reporting Agency developed, there are also different factors that determine that score. Your credit score helps determine whether or not you are approved for the credit. Sometimes, the credit score is the only thing the credit grantor will look at. If the credit grantor can approve/reject you within minutes, that means they are only using your credit score. For example, when you apply for a cellular phone, they ask for your social security number and run a credit check on you. They call the credit reporting agency, give them your personal information and social security number and ask for a score. If you made the cut-off, then you will be approved. The maximum score can vary depending on the model, but it ranges around 800-900. It can go above because you can improve your credit score by the way you as a borrower behaves according to the credit grantors. Points are added every time you do something that the score model considers positive and vice versa with consumer behavior that is considered negative.