What is a Credit Score?
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Innovative Mortgage Group
P.O. Box 600
Brodheadsville, Pa. 18322
Main#:(570) 402-4971 Fax#:(570) 402-4973
contact@innovativemtg.net
P.O. Box 600
Brodheadsville, Pa. 18322
Main#:(570) 402-4971 Fax#:(570) 402-4973
contact@innovativemtg.net
| Licensed by the Pennsylvania Department of Banking |
A credit score is a number based on a statistical analysis of a person's credit files, that
represents the creditworthiness, which is the likelihood that the person will pay his or her bills.
A credit score is primarily based on credit report, typically from one of the three major credit
bureaus, Experian, Trans Union and Equifax.
FICO is used by many mortgage lenders that use a risk-based system to determine the
possibility that the borrower may default on financial obligations to the mortgage lender. The
credit bureaus all have FICO alternatives: Equifax's ScorePower, Experian's PLUS score, and
TransUnion's Credit score.
A FICO score is between 300 and 850, exhibiting a left-skewed distribution with 60% of scores
between 650 and 799. According to Fair Isaac the median score is 723 (half of scores above
and below) whereas according to Experian (using the Fair Isaac risk model) the average credit
score is 678 (lowest scores are farther from the median than the highest scores). The
performance of the scores is monitored and the scores are periodically aligned so that a credit
grantor normally does not need to be concerned about which score card was employed.
Each individual actually has three credit scores for any given scoring model because the three
credit agencies have their own, independent databases. As these databases are independent
of each other, they may contain entirely different data. Many lenders will check an applicant's
score from each bureau and use the median score to determine the applicant's credit
worthiness.
Credit ratings are determined differently in each country, but the factors are similar, and may
include:
represents the creditworthiness, which is the likelihood that the person will pay his or her bills.
A credit score is primarily based on credit report, typically from one of the three major credit
bureaus, Experian, Trans Union and Equifax.
FICO is used by many mortgage lenders that use a risk-based system to determine the
possibility that the borrower may default on financial obligations to the mortgage lender. The
credit bureaus all have FICO alternatives: Equifax's ScorePower, Experian's PLUS score, and
TransUnion's Credit score.
A FICO score is between 300 and 850, exhibiting a left-skewed distribution with 60% of scores
between 650 and 799. According to Fair Isaac the median score is 723 (half of scores above
and below) whereas according to Experian (using the Fair Isaac risk model) the average credit
score is 678 (lowest scores are farther from the median than the highest scores). The
performance of the scores is monitored and the scores are periodically aligned so that a credit
grantor normally does not need to be concerned about which score card was employed.
Each individual actually has three credit scores for any given scoring model because the three
credit agencies have their own, independent databases. As these databases are independent
of each other, they may contain entirely different data. Many lenders will check an applicant's
score from each bureau and use the median score to determine the applicant's credit
worthiness.
Credit ratings are determined differently in each country, but the factors are similar, and may
include:
- Payment record - a record of bills being overdue will lower the credit rating.
- Control of debt - Lenders want to see that borrowers are not living beyond their means.
Experts estimate that non-mortgage credit payments each month should not exceed
more than 15 percent of the borrower's after tax income