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Home > FAQ > Credit Scores FAQ Nov 22, 2017

About credit scores

1) What is a credit score?
2) Who uses credit scores?
3) What is the range of a credit score?
4) What factors impact a credit score?
5) Do inquiries affect a credit score?
6) Do late payments affect a credit score?
7) Do pre-approved offers affect a credit score?
8) Does co-signing for a loan affect a credit score?
9) Does my spouse's credit impact my credit score?
10) Does having too many credit cards hurt my score?
11) What is a FICO® score?
12) What is a VantageScore®?
13) What is a Beacon® score?
14) What is an Empirica® score?

1) What is a credit score? [top]

A credit score is a numerical index which represents an estimate of an individual's financial creditworthiness. It is based on a subset of the information in an individual's credit report. Because there are many different credit scores, the model used to calculate the score you obtain, and the score itself, may be different than the one the lender uses in making its decision.

2) Who uses credit scores? [top]

Banks, credit card companies, auto dealers, retail stores and lenders all use credit scores to determine credit limits and interest rates. In recent years, employers and landlords have also begun to rely increasingly on credit reports and credit scores to evaluate prospective job candidates and tenants.

3) What is the range of a credit score? [top]

Credit scores vary in range by consumer reporting agency. However, in all cases a higher score indicates lower credit risk. Ranges for the three major consumer reporting agencies are Equifax 300-850; Experian 340-820; TransUnion 400-925. FICO® scores range from 300 - 850, while the recently announced VantageScore® will range from 501 - 900.

4) What factors impact a credit score? [top]

Credit scores count every consumer-initiated credit application. Therefore, excessive applications for credit can adversely affect a score. However, it is becoming more common for risk score models to recognize when a consumer is shopping for the best rates and either ignore inquiries for a specific purpose within a period of time, or count multiple inquiries for a specific purpose as only one. This is most common in mortgage and auto lending. In such cases, shopping around will have little or no impact on a risk score.

5) Do inquiries affect a credit score? [top]

Careful study has shown that inquiries are an indicator of credit risk. Recent inquiries indicate a person may have outstanding accounts that are not yet part of the credit report. The more inquiries that appear on a borrower's credit file, the more likely a borrower may not be able to pay his or her bills as agreed. However, inquiries have a relatively small impact on your credit score. In a credit scoring model, there are other, stronger indicators of future payment performance, such as past payment history and use of credit. These indicators can offset an inquiry. Inquiries are rarely, if ever, the only reason for poor credit scores or being declined. They only become significant if there are other issues, such as late payments or very high debt as compared to income you include on your credit application.

6) Do late payments affect a credit score? [top]

Paying bills on time is generally the single most important contributor to a good credit score. Being late on any bill, for any length of time, is a possible indication of future non-payment of debt and is almost always viewed negatively by lenders. Any late payments will remain on your credit report for up to seven years.

7) Do pre-approved offers affect a credit score? [top]

No, only applications for credit initiated by the consumer will affect your score. Inquiries into your credit for account review purposes as well as preapproved offers of credit have no effect on credit scores.

8) Does co-signing for a loan affect a credit score? [top]

Absolutely. By cosigning, you are accepting full responsibility for the debt if the other person does not pay as agreed. A cosigned account will appear on both your credit history and the other person's. All loans and credit card accounts that appear on your credit report will impact credit scores.

9) Does my spouse's credit impact my credit score? [top]

If you hold a joint credit account, have co-signed a loan or have authorized use of another person's credit, these items could affect a score if they appear on your credit report. It's important that joint account holders or authorized users understand that their credit behavior does affect the other joint account holder or main account holder. A credit account held solely in the name of your spouse, child or any other family member cannot impact your credit score. However, in community property states, all debt acquired during a marriage is considered a joint debt, regardless if the account is joint or in the name of an individual spouse.

10) Does having too many credit cards hurt my score? [top]

Having too many credit cards with either high balances or large amounts of credit available can negatively impact risk scores depending on the overall credit history.

11) What is a FICO® score? [top]

A FICO® score is a credit score produced from models developed by Fair Isaac Corporation. The score is used to measure a consumer's creditworthiness and risk, and is in use worldwide. You have three FICO® scores, one from each credit bureau, because they each have their own proprietary methods for collecting and assessing the information. Equifax calls it your Beacon® score; Experian calls it your Experian/Fair Isaac Risk Model score; and TransUnion calls it your Empirica® score. FICO® scores range from 300 - 850 and are available through all three consumer reporting agencies.

12) What is a VantageScore®? [top]

First announced in March 2006, VantageScore® is the latest addition in consumer credit scoring models. Its methodologies and algorithms were cooperatively developed by Equifax, Experian, and TransUnion, the three major consumer reporting agencies. While the formula for calculating this particular score is different, a VantageScore® effectively serves the same purpose as a FICO® score: to measure consumer creditworthiness. VangtageScores range from 501 - 900. See the official website for more information.

13) What is a Beacon® score? [top]

Beacon® score is the name Equifax gives to the FICO® score it calculates using the credit scoring models developed by Fair Isaac Corporation.

14) What is an Empirica® score? [top]

Empirica® score is the name TransUnion gives to the FICO® score it calculates using the credit scoring models developed by Fair Isaac Corporation.




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