Credit scores used by credit bureaus
AutoEvery time you apply for credit, whether it’s a mortgage, a credit card, or a student loan, the lender wants to know what your risk will be. FICO Scores are used to give lenders the ability to determine your credit risk.
Each Experian, Equifax, and TransUnion credit bureau generates a FICO score for you. Your score changes according to the personal information stored by the credit bureau stores. Interest rates and loan amounts are determined by FICO scores. Improving or removing detrimental items from your credit report improves your FICO to help you qualify for better loan terms and larger loan amounts.
In order for your FICO score to be calculated, you will need an account that has been open for more than 6 months and has been updated in the same amount of time. This allows bureaus to have enough up-to-date information to generate a FICO score.
Credit scores are called FICO scores., because the technology and software were created by a company called the Fair Isaac Company. Ergo FI-CO was born.
FICO scores provide a guide for lenders to determine the riskiness of the loans they write. This is all based on the information and data you provided in your report. The higher your score, the lower the risk and vice versa.
Each lender has established a risk limit, strategy, and scoring model that determine future risk. The 3 credit bureaus use different terminology for their FICO scores, although they were all developed using the same methods as Fair Isaac Co. These are the different scoring models.
Credit reporting agency and scoring model name
- Equifax uses BEACON® Score
- Experian uses the Experian/Fair Isaac Risk Model (FICO)
- TransUnion uses EMPIRICA®
When you talk about your credit score, people often think you’re talking about your FICO score, credit bureau scores aren’t the only criteria used.
They are part of the general components used, here are some more:
- how much money do you earn
- your work experience
- Residence (either owned or rented), etc.
In order to create more confusion among consumers, many lenders use different scoring models, instead of relying on FICO or their respective brand. There could be many different variations of a single scoring model.
Scoring is very diverse for different offices. This is because each bureau may hold different information about you and assign more or fewer different items in the weighting process.
A longer credit history and timely payments will improve your FICO Score, but late payments and sometimes inaccurate data entry will lower your score.
Your credit scores will determine how you will be able to obtain lines of credit, in this time of financial turmoil, it would be wise to keep abreast of your credit files.
For your success,
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