Credit Scores

A credit score is simply the numerical translation of your credit report, and provides a quick (though seemingly impersonal) way of portraying the risk you represent to a lender. To calculate a credit score, each aspect of an applicant's relevant financial information, such as the number of lines of credit they may have and how they've been managed, is assigned a value. These values are plugged into a formula, and after some additional number crunching, an overall score is determined, usually somewhere between 300 and 850 - the higher the better. Your score tells a lender how likely you are to repay a loan and if they can expect your payments on time. As mentioned in the Credit Report lesson, over the past decade or so, the use of this information has changed. These days, a low score can hurt your chances of getting a job, an apartment, and even increase your insurance premiums. Now more than ever it is important to keep your credit in good standing.

Graphs and Business Objects

There are different types of credit scores; the most popular assessment method is the risk scoring system from Fair Isaac, commonly known as a FICO score (named for the Fair Isaac Company). FICO scoring is an automated rating process for credit reports. The score is meaningless by itself. In the end, it is usually only one element of a larger assessment formula, which may vary from one creditor to the next.