What is a Credit Score?
What is a credit score?
Good question. Glad you asked.....
A credit score is a number, usually between 350 and 850 that is assigned to your credit report at that particular moment in time. It involves a complex mathematical algorhythm using what data is available on your credit report from each individual bureau.
Ok, that was complicated. Think of it as a snapshot of risk that lenders use to determine how well you will make your monthly payments in the future. The higher the score, the lower the risk associated with it.
Fair & Isaac and company (FICO) designed the score to determine the risk that any person might have a 90 late tradeline within the next 24 months. The results were pretty astonishing, as it was found to be a pretty good predictor.
While the formula is "tweaked" every so often, a new version will start appearing in the late spring or early summer of 2008 according to our sources.
So, what are the risks with each score? The first number is the score and the second set is the odds that this person will have a 90 day late in the next 24 months. For example, 1:100 means that 1 person in 100 will have the late.
Greater than 800.................... 1:1,292
Around 700.............................. 1:123
Below 600................................. 1:8
As you can see, the higher the score the less risk to the lender and the better interest rate that the borrower can get.
Next time, we'll talk about what is found (and not found) on your credit report.
Scott
Scott Swinford is an Executive Consultant for the US Consumer Credit Restoration Association and a Certified Mortgage Planning Specialist in Northwest Indiana. If you have any questions, you can send email to scott@USCCRAonline.com.
Good question. Glad you asked.....
A credit score is a number, usually between 350 and 850 that is assigned to your credit report at that particular moment in time. It involves a complex mathematical algorhythm using what data is available on your credit report from each individual bureau.
Ok, that was complicated. Think of it as a snapshot of risk that lenders use to determine how well you will make your monthly payments in the future. The higher the score, the lower the risk associated with it.
Fair & Isaac and company (FICO) designed the score to determine the risk that any person might have a 90 late tradeline within the next 24 months. The results were pretty astonishing, as it was found to be a pretty good predictor.
While the formula is "tweaked" every so often, a new version will start appearing in the late spring or early summer of 2008 according to our sources.
So, what are the risks with each score? The first number is the score and the second set is the odds that this person will have a 90 day late in the next 24 months. For example, 1:100 means that 1 person in 100 will have the late.
Greater than 800.................... 1:1,292
Around 700.............................. 1:123
Below 600................................. 1:8
As you can see, the higher the score the less risk to the lender and the better interest rate that the borrower can get.
Next time, we'll talk about what is found (and not found) on your credit report.
Scott
Scott Swinford is an Executive Consultant for the US Consumer Credit Restoration Association and a Certified Mortgage Planning Specialist in Northwest Indiana. If you have any questions, you can send email to scott@USCCRAonline.com.
posted by Scott Swinford at
4:46 PM
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