Beacon Credit Score
Check average credit scores to compare your credit score with others in your state.
Your Beacon score is the rating credit agencies assign based on your credit history. Simply, the higher your Beacon score, the lower your financing cost will be due to the lender's lower perceived default risk.
A credit score is a number, computed from the information on your credit report, such as payment history, amounts owed, number of accounts and length of credit history. Your credit score objectively predicts the likelihood that you will pay back a loan, or make payments according to the agreed-upon terms.
A scoring model is the series of computations used to arrive at your credit score. Although we know what types of information are included in compiling a credit score, the exact computation procedures such as how each specific factor is weighted is a closely guarded secret of credit bureaus.
Scoring models are validated based on statistics from thousands of actual consumer credit files.
Credit score models are computed by one of the three credit bureaus; Experian, TransUnion and Equifax.
Your credit score is extremely important, because a variety of financial decisions are based on your credit score model, such as:
- Being approved or declined for a loan/credit card
- Whether you are required to put down a big deposit, small deposit or no deposit at all
- Whether you are required to put down a big down payment, small down payment or no down payment for that car or mortgage loan
- Whether you are offered a high or low interest rate for credit purchases
- Better rates, and offers for credit cards or loans
There are three different types of credit scores and they are based upon the three different national credit bureaus: Experian, Equifax and Trans Union.
Each credit reporting agency has a different brand name for their main scoring model:
- For Equifax, it is called the Beacon Score
- For Experian, it is called the FICO Score
- For Trans Union, it is called the Empirica Score
Your Beacon, FICO, and Empirica credit scores will almost always be different, even though the scoring models within each of them were jointly developed with Fair, Isaac and Co.
A major reason for the difference: Beacon relies on Equifax data, FICO relies on Experian data, and Empirica relies on Trans Union data. The three bureaus don't share information with one another.
They have different ways of representing your data. They have different business customers making inquiries about you. Often, there are differences in which companies report to them. This results in scores that could be very different.
Aside from these 3 main types of scoring models, each type also has many different subtypes that are customized to fit each credit agency's needs.
For example, Trans Union's Empirica scores come in many variations, each of which is a different credit score for a different purpose. That is, there is a version for automobile financing, a version for instalment loans, a version for bank cards, and a version for personal finance.
The same applies to Experian's FICO scores and Equifax's Beacon scores. In addition to the generally available scoring models, many credit grantors have customized models for their own particular needs.
Over time, computation methods and scoring models are continually updated to newer, more effective versions. However, many lenders would rather stay the old "algorithm" because they've built their decision rules over time and they aren't ready to change. That is why you'll sometimes see scoring models represented as Empirica 95, and the current version of Empirica. There's Beacon 96, and the old version of Beacon. There's FICO and "classic FICO".
Your credit score is an ever-changing model that represents your credit at one particular moment in time. Your score is based on the contents of your credit files, which are constantly changing. For example, a credit grantor could request your score, and someone requesting it 5 minutes later might see a different score.
You probably have a file with Experian, another with Equifax, and another with Trans Union. Each is likely to be different, at least to a small degree. Not all credit grantors report to all three credit bureaus. Updates for each credit reporting agency may be performed at different times of the month.
Inquiries are only in your file for the particular bureau(s) that processed the inquiry. Of course, if a particular credit bureau has an erroneous entry in your credit file, that bureau's score might be drastically different from the others. It's possible that all three bureaus have the same error, causing an invalid score on all three.
Thus, it is always a good idea to order a credit score from all three companies so that you can compare the scores and check for any obvious inaccuracies.
Financial Institutions have increasingly come to rely on what's known as "risk-based credit scoring" to determine your credit worthiness. These scores are suppose to measure how likely you are to repay a debt-and are a key factor in determining if you can get credit, and at what cost.
Fair Isaac Company developed theses scores over forty years ago and most credit bureaus use their "scorecard' to create credit scores for individuals. A score is defined as a number that tells a lender how likely an individual is to repay a loan, or make credit payments on time. Fair Isaac's software calculates your score on the basis of data collected in five basic categories: payment history, amount owed, length of credit history, new credit, and types of credit used.
Fair Isaac has revealed how each of these factors is weighted and how you can improve your score.
Payment History (about 35% of total score): How have you paid your debts in the past? Specifically, how late you payments were, how much was owed, how many late payments, and how recently the occurred are all taken into account. According to fair Isaacs, a 30-day late payment made just a month ago will count more than a 90-day late payment made 5 years ago.
Amounts Owed (about 30% of total score) How much is too much? While owing a lot of money on many accounts might indicate that you are overextended, you score will not necessarily be harmed by large outstanding amounts. What is important is how many accounts have balances and how much of the total credit line is being used on credit cards and other "revolving accounts."
Length of Credit History (about 15% of total score): How established is your credit? How long has your credit accounts been established? How long since you used certain accounts?
New Credit (about 10% of total score) Even though this category makes up only about 10% of the total score, applying for too much new credit is probably one of the easiest ways for people to inadvertently harm their credit score. Here the scoring takes a look at how many new accounts you have established, how long has it been since you have opened a new account and how many recent requests have been made by credit reporting agencies.
Types of Credit (about 10% of total score) Is it a healthy mix? This factor takes into account your mix of instalment loans, mortgages, retail accounts, credit cards and finance company accounts.