Beacon is the trade name that the Equifax credit reporting agency uses for the FICO credit scores it provides. The other credit bureaus use the FICO scoring system as well, although TransUnion markets it under the trade name "Empirica." Beacon scores provide an estimate of the credit risk that borrowers present based on a mathematical model of the information on their credit histories.
Prompt Payments
A consumer's record of on-time bill payments makes up 35 percent of a Beacon score. Payments more than 30 days late seriously lower the score.
Indebtedness
Total debt determines another 30 percent of the Beacon score. The amount of debt is compared to income, and excessive indebtedness results in a lower score.
Debt Type
Unsecured debt presents more risk to lenders. For this reason, excess credit card or other unsecured debt will lower the Beacon score. It accounts for 10 percent of a Beacon score.
Volatility
Frequently closing credit accounts and applying for new accounts is an indicator of increased risk and may reduce a Beacon score as much as 10 percent.
Time Frame
The length of a consumer's history of using credit counts for 15 percent of the score. Good (or bad) use of credit over the long term is a strong indicator of future behavior.
Negative Events
Foreclosure, a defaulted debt obligation, and tax liens lower Beacon scores. Bankruptcy also hurts but may be offset because much of the information on a credit history is expunged after passage of time.
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