Credit Score –What Is It All About?
While you apply for a loan or a mortgage, the first thing that your creditor or lender will check is the credit score. Thus, it can be well understood that credit score is an important part of your credit health and influences the amount of loan or mortgage that will be available to you. This is a number which will help the lender to judge the risk that he will be taking while loaning an amount to you. So, the higher the credit scores, the better chances to get qualified for a loan. It actually helps the creditors or lenders to evaluate your credit report as it basically summarizes your credit risk.
What is FICO score?
Well, when we speak of credit scores, we often refer to it as FICO score. This is a scoring model developed by the Fair Isaac and Company (FICO) and is most commonly used by all lenders and creditors. This score mainly depends upon the information of the consumers as reported by the creditors at the credit reporting agencies. It should be noted here that these scores range from 300 – 850. Different credit reporting agencies have given different names to this score. For example, Equifax calls it BEACON Score whereas Experian calls it Fair Isaac Risk Model. At TransUnion, it is known as EMPIRICA.
What constitutes a superior credit score?
As stated earlier, the FICO credit score ranges from 300 to 850. The lenders will consider you low risk if you have higher credit scores. If your score ranges in between 750 – 850, then you will be considered as an excellent consumer for loans. However, after saying that, it should be noted that every lender has their specific criteria for judging the risk profile of the consumers. So, it is difficult to provide a single cut off score.
What are the minimum requirements to calculate a FICO Score?
In order to get your FICO score calculated, there are certain requirements that you need to fulfil. Your credit report should have enough recent information so that the credit bureaus can generate a score. You should have at least one account which has been opened or operated by you in the last 6 months. Also, it is very important that your creditor or lender reports that account on a regular basis to the credit bureaus so that they can generate a score.
Do credit scores differ with the credit bureaus?
Yes, you will find that the top 3 credit bureaus – Equifax, Experian and TransUnion offer different scores for your credit file. This is because each credit bureau will calculate your credit score depending upon the information that is reported on your file. Not all creditors and lenders report information to all the credit bureaus.
Does FICO score change over the times?
Absolutely, it will change! The credit score is calculated based on the information on the report. As the information changes, your scores will also change. Normally, if you pull your credit report, it will be valid for 90 days only.
Hopefully, now your doubts about credit scores have been cleared!