FICO has served as the most popular and trusted credit scoring model since the middle of the 20th century. The name FICO is derived from the developer of the scoring model, Fair Isaac & Company, Inc. The basic FICO scoring system is the basis for credit reporting models used by the three standard credit reporting bureaus in the United States.
The Beginning
The FICO storing model was developed during the 1950s. According to the Daily Interest website's account of FICO history, mortgage businesses have been somewhat skeptical about the accuracy and useful of FICO scores since the early days. However, many other types of creditors and some non-credit businesses like insurance companies have been using FICO scores to gauge a consumer's credit worthiness since the 1950s.
Credit Reporting Bureaus
When you go to a lender and seek financing, they typically inform you that they are going to check your credit score. Some creditors subscribe to one credit reporting bureau, while others gather scores from all three of the major credit reporting bureaus. Mortgage lenders usually use multiple scores to gauge your credit worthiness. The three major reporting bureaus are: (Equifax) Beacon, (Experian) Experian/FICO and (TransUnion) Empirica. Each of these credit reporting bureaus uses a modified version of the original FICO scoring model to fit their particular score reports.
Scoring Factors
A large number of niche factors are used to calculate your FICO score. Expecting consumers to have awareness of each specific FICO scoring component is impractical. However, each of the specific FICO scoring elements is broken down into five basic categories, indicates the MyFICO website's "What's in your FICO score." These categories include your payment history, amounts owed, credit history length, new credit and types of credit used. In general, your consistency in making on-time loan payments and have a low credit utilization ratio are key scoring considerations. Credit utilization is your percentage of available credit in use.
FICO in the 21st Century
FICO remains a prominent influence in your ability to get affordable credit as of 2011. FICO scores range from 350 to 850, with most experts noting an excellent rating of 775 and above. This gives you the best opportunity to get your optimum financing rates and terms. The reporting bureaus continue to evaluate the accuracy of their scoring models in interpreting your credit worthiness. Daily Interest notes that Equifax, for interest, worked in the early 21st century to improve the influence of negative marks on people based on the number of times their credit is checked.
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