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About Credit Scores
Along with the credit report, lenders can also buy a credit
score based on the information in the report. That score is calculated by a
mathematical equation that evaluates many types of information that are on
your credit report at that agency. By comparing this information to the
patterns in hundreds of thousands of past credit reports, the score
identifies your level of future credit risk.
In order for a FICO® score to be calculated on your credit
report, the report must contain at least one account which has been open for
six months or greater. In addition, the report must contain at least one
account that has been updated in the past six months. This ensures that there
is enough information - and enough recent information in your report on which
to base a score.
About FICO® scores
Credit bureau scores are often called "FICO scores"
because most credit bureau scores used in the US are produced from
software developed by Fair Isaac and Company. FICO scores are provided to
lenders by the three major credit reporting agencies: Equifax,
Experian and TransUnion.
FICO scores provide the best guide to future risk based solely
on credit report data. The higher the score, the lower the risk. But no score
says whether a specific individual will be a "good" or
"bad" customer. And while many lenders use FICO scores to help them
make lending decisions, each lender has its own strategy, including the level
of risk it finds acceptable for a given credit product. There is no single
"cutoff score" used by all lenders and there are many additional
factors that lenders use to determine your actual interest rates.
Other Names for FICO Scores
FICO scores have different names at each of the three credit
reporting agencies. All of these scores, however, are developed using the
same methods by Fair Isaac, and have been rigorously tested to ensure they
provide the most accurate picture of credit risk possible using credit report
data.
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Credit Reporting
Agency
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FICO® Score
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Equifax
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BEACON®
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Experian
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Experian/Fair Isaac Risk
Model
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TransUnion
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EMPIRICA®
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More than one
score
In general, when people talk about "your score",
they're talking about your current FICO score. However, there is no one score
used to make decisions about you. This is true because:
- Credit bureau scores are not
the only scores used.
Many lenders use their own scores, which often will include the FICO
score as well as other information about you.
- FICO scores are not the only
credit bureau scores.
There are other credit bureau scores, although FICO scores are by far
the most commonly used. Other credit bureau scores may evaluate your
credit report differently than FICO scores, and in some cases a higher
score may mean more risk, not less risk as with FICO scores.
- Your score may be different
at each of the three main credit reporting agencies.
The FICO score from each credit reporting agency considers only the data
in your credit report at that agency. If your current scores from the
three credit reporting agencies are different,
it's probably because the information those agencies have on you
differs.
- Your FICO score changes over
time.
As your data changes at the credit reporting agency, so will any new
score based on your credit report. So your FICO score from a month ago
is probably not the same score a lender would get from the credit
reporting agency today.
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