Bad Credit Loans
QWhat Are Credit Scores?
AA credit score (such as FICO - developed by Fair Isaac & Co and used by Experian, or BECON Ö developed and used by Equifax or EMPIRICA Ö developed and used by Trans Union) or credit scoring is a method of determining the likelihood that a credit user (you) will pay their bills. Fair Isaac began its pioneering work with credit scoring in the late 1950Òs. Since then scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrowers credit history into a single number. Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission has ruled this practice to be acceptable. Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information that best predict future credit performance. Developing these models involves studying how thousands, even millions, of people that have used credit. Score-model developers find predictive factors in the data that have proven to indicate future credit performance. Models can be developed from different sources of data. Credit-bureau models are developed from information in consumer credit-bureau reports. Credit scores analyze a borrower's credit history considering many factors such as: Late payments The amount of time credit has been established The amount of credit used versus the amount of credit available Length of time at present residence Employment history Negative credit information such as bankruptcies, charge-offÒs, collections, etc. There are really three credit scores computed by data provided by each of the three bureausÖÖExperian, Trans Union and Equifax. Some lenders use one of these three scores, while other lenders may use the middle score and still others may use all three.