Beacon Score

Beacon score .....who knew a small bank in a moderate sized city in Florida would use this to determine eligibility to become a credit union member?

A cruise around the internet makes it seem that this score is an old dinosaur put to rest. NOT SO! Just as fashion fads come and go and come back at a later time, so my thinking goes on older credit score models. The same could be true.

The beacon score was developed in a era of tighter lending requirements that was mostly scrapped in the early part of this century. The economy was good and lenders wanted scores that accepted a higher rate of approval among its applicants. Once the financial crisis started as anyone trying to lend money or borrow it well knows the requirements have tightened enormously and credit scores such as the Beacon score may look good in a lenders eyes once again.

Beacon score is the name Equifax placed on this version of one of their credit score models. It was replaced by another product called Next Gen and in turn Equifax named it's version Pinnacle. The main feature of these later score models were the ability to approve more customers. Mostly this meant that these banks were taking on more risk and doing so in the name of profits and not enough caution. The era of subprime lending was in full swing.

Most all credit score models originate with the maker, that being the Fair Issac Corporation. These credit score models are designed to measure a persons creditworthiness. The score generated represents the amount of risk the lender will be taking on lending money to the consumer that a score is generated on.

The exact algorithm of any credit score model is not known AND your lender may, and usually does apply it's own criteria to that mix. It is understood that all FICO products go approximately by the same mix of information that make up the score with some slight variations among the different score models as there are also different versions of this score.

The Beacon score is no different. That mix is as follows

35% payment history

Paying on time and as agreed will make your score high. Conversely late payments, collections or settlements reflect negatively.

30% amount of debt

What is mostly looked at here is the amount of credit that has been extended by all your creditors and how much of that you use. Current advise is to keep this below 30% and 10% is for the best scores.

These first two may be all that a lender may look at as they consist of most of the story of how a person handles their debt load.

15% Credit history

How long a person has been handling debt. The earliest date found on your trade lines will be recorded.
A long good credit history can help those who have had problems in this difficult financial period. If you have had a period of problems with late payments and are able to resolve that the long credit history that was in good standing can help in the rebuild process.

10% Inquiries and new account openings

Keeping these to a minimum will add to the look of debt handled well. Those with a money management problem seem to need to move money around often.

10% types of accounts

Having a good mix such as credit cards, installment loans, store and gas cards, ect these all help to show how well you handle your debt.

As with most FICO products the score range starts around 300 though no one usually can obtain a score that low. The highest being a 850 and again there are very few that can even achieve above the 800 score let alone 850. Usually 720 and above will get you where you would like to be.

What may be different with the Beacon Score in comparison to those scores that followed it is that this score model may require a higher number to be acceptable for lending purposes. Higher score, less risk, more responsibility.

That small bank in Florida probably has always used the beacon score and therefore acquired much smaller risk during those times of much money flow and less customers but never needed the bail out or perhaps didn't even bat an eyelash at this difficult economy!

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