Credit Score

Check average credit scores to compare your credit score with others in your state.

When you apply for credit and your application is approved or denied the decision is based on your credit score. Credit scores can be thought of as tools used by creditors to weigh the risk of lending an individual credit. In the past only lenders were privy to credit scores recently this information has become accessible to consumers. If there is an error on your credit you can access your credit score and dispute the negative error that is resulting in bad credit. In the event your credit standing is good you may just want to review your credit score to see if you need to improve the credit standing. Many resources are available to the consumer to obtain free credit reports and credit scores to check their credit standing or see if any corrections need to be made.

More specifically credit scoring is a method lenders use to help in deciding whether to give you credit or not. Information reported by credit bureaus such as TRW, Equifax, Trans Union and Experian. They give credit reports on your past and present credit experiences such as bill paying history, the type and number of accounts you have, and late payments or collection actions. Outstanding debt and how old the accounts are will be accessed in the credit scoring also. When your credit is scored a statistical program is used by creditors to compare the information to the credit performance of consumers with similar profiles.

A credit scoring system awards points for each factor that assists the creditor in predicting who is most likely to repay a debt statistically. A total number of point credits are added up or scored and helps indicate how credible and creditworthy you are. If it is likely you will repay a loan in the eyes of the creditor depends upon this score. Your credit bureau report is an important condition of the credit scoring system it is important you have no credit disputes or corrections to credit that need to be made. It would be in your favor to have any problems or disputes corrected before you apply.

There are three major credit-recording bureaus and three sources of scoring the credit reports. The Beacon/FICO/Empirica are credit scorings systems used by what is known as the big three of credit reporting bureaus. The Empirica scoring system is used in the scoring of credit reports generated from Trans Union. Equifax utilizes the Beacon Scoring system. Experian formerly, TRW uses what is known as the Fair Isaac system.

All of the different credit bureaus and styles of scoring may seem confusing. In addition to three different scoring systems for three different credit bureaus the scores can vary. This is because each bureau may have different data from different creditors. However, the scores all basically measure the same and should be close in indicating if your credit report is a good or bad credit report.

A borrower's income, assets and bank accounts are not taken into consideration by the scoring systems. The credit score is based solely on the credit reports of payment times, defaults and outstanding credit at present.

Factors that are taken into consideration while scoring are payment history. This wold includes public record and collection items. The severity and how recent they were incurred and how frequent delinquencies occur are used in scoring this section. Outstanding debt is an important part of the scoring systems as well. Taken into consideration are the number of balances reported recently, the average balance, any revolving credit lines and the relationship between total balances and total credit limits. Credit history is considered in scoring. The age of your oldest credit line is considered. Many consumers find they are denied credit not because they have a bad credit report but due to the fact there is no credit history.

Using a credit scoring system is more reliable than basing the decision on real data and statistics. It is certainly more reliable than subjective judgment methods because it judges all applicants objectively.

Credit scoring methods can be based on more information than that supplied by the credit bureaus on your credit report. Creditors may consider information that you supplied on the credit application as well. Examples would be your occupation, how long you have owned your home, if you rent a home and length of time with your employer. These factors may either be always used in deciding to grant credit or if your score is close to the border of being denied or approved. Each creditor has a different policy regarding use of this information if they use it at all.

There are many resources available to the consumer to obtain copies of your credit score and credit report. Many companies offer online credit reports and some offer free credit reports and credit scores. If you obtain these reports to review you can decide if you need to improve your credit or if corrections need to be made to any of the information reported by credit bureaus. If you believe there was an error or something incorrect you will have to dispute the report with the lender or creditor to have the matter rescinded.