What Is a Credit Score? How Is It Determined?
Understand how your 3 credit scores are calculated
The better you understand how your
credit score is determined, the more you'll be aware of how your credit-related activities will affect that score.
A
credit score is a statistical model. Developers of credit scoring models analyze the credit-related behavior of literally millions of consumers, looking for similarities and trends. For example, if a significant portion of consumers who default on their credit obligations have something in common, then the statisticians can look for that attribute in future applications and calculate the likelihood that someone in a similar situation will also default. Conversely, if there are patterns indicative of desirable credit behavior, the statistical model attempts to identify those. Most
credit scores are based on a formula – called the FICO
® score – developed by the Fair Isaac Corporation.
Typically your
credit score takes into account:
- Number and severity of late payments
- Type, number and age of accounts
- Total debt
- Recent credit report inquiries
A number of factors are prohibited by law from being included in your credit score:
- Your age
- Salary and employment information (however, a lender may consider this information separately)
- Where you live
- Interest rates on other credit accounts
- Child/family support and rental agreements
- Credit inquiries made by yourself, prospective employers and prospective lenders seeking to make "pre-approved" credit offers
Understanding your
credit score is critical. But that's just the first step. You need to move beyond understanding, to proactive planning and credit management.
IDENTITY GUARD® - the leader in credit management services - is committed to helping consumers understand and protect their credit ratings. Our EXTRA CAUTIONSM service monitors all three major credit reporting agencies - Equifax®, Experian®and TransUnionSM - to keep you apprised of your credit score and alert you promptly to potentially suspicious changes to your credit file - minimizing the risk of real damages occuring. It's a 3-3-3 credit profile - 3 credit reports, 3 credit scores, 3-bureau monitoring.
Plus, with EXTRA CAUTIONSM, you get daily surveillance of the Internet's "financial black markets", "back alley" chat rooms and news groups. Patented scanning technology helps ensure that your important financial information is not being compromised or "swapped" in sites frequented by identity thieves.
IDENTITY GUARD also offers Credit Analyzer, an interactive, online tool that helps predict how certain actions - for example, applying for a mortgage - might affect your score.
Want even more help? IDENTITY GUARD also has Credit Education Specialists to answer questions regarding your credit report and credit score.