a score model listing
FICO score, many companies will let you know yours..... for a price.
That score is a numerical value associated with your credit history that lenders use to judge how likely you are to pay back what has been lent to you.
In past times the credit score was something the mortgage industry primarily used.
Not so any more as an ever growing multitude of lenders and service providers and at times employers feel the need to use the risk factors associated with credit scores to determine rates and in some cases fees, more collateral, denials and even whether you are a good job candidate!
What many consumers do not realize is there is not just one way to determine that score. There are many score models and some are specific to an industry. Insurance being one of those industries.
These score models have been written with changing needs in mind. As the market and consumers habits change so is the need for prediction of these habits by lenders.
As the current economic difficulties will show that once lenders were MUCH more lenient with there lending practices and those have been replaced with at times almost impossible circumstances for many to be approved for that new loan or line of credit.
Another thing to keep in mind is that while lending institutions will use a FICO score they will also have their own criteria and factors in mind when making a decision about lending to you. They may even use their own credit scoring system along with that FICO score they receive in the decision making process.
So there are many variables in the determination of your score coupled with the fact that your information is ever changing and therefore your score will also change.
With this all in mind knowing some of the FICO score models and their general differences can be helpful in improving your credit score.
Usual score range 300-850
This includes FICO 98 FICO 04
The FICO score classic version is the traditionally most used version and considered the industry standard.
This is so as it has been in existence the longest and it's predictability has proven mostly reliable.
Generally used for mortgages but will have versions for specific uses such as automobile.
Each version is followed by the year it was developed. It's main purpose is as follows...
It "Rank-orders consumers by the likelihood that they will become severely delinquent (90 days or worse past due) in the next 24 months."
Claims 15% better predictability than the previous models.
This version as the others relies heavily on the debt and payment portions of totaling your score, but is more lenient on the single bumps of isolated late payments.
Another area initially in much debate with fico 08 was the denial of authorized user information being used in the scoring formula.
Traditionally authorized users were family members placed on the account not responsible for payment but there to help build the credit of the card owner.
What has spoiled this action are credit repair companies that exploit the provision by charging a fee to their clients to add a stranger with superior credit as a user (without the ability to use the credit line). This practice is known as piggybacking and OF COARSE fair issacs is going to look for a way to stop that.
By July of 08 and after much outcry from those who do not exploit the system Fair Issac found a way of separating true authorized users from the piggybackers.
Authorized users were once again recognized in the formula.
The Transunion web site claims that fico o8 is expected to have twice the predictive power than before, increasing the ability of their clients to reduce losses especially among those with new accounts or previously derogatory information. The best analytic work ever.
(Hope it measures up to that statement!)
This classic version also has 2 industry specific versions for autos and bankcards.
FICO Scores are used by the major CRA's (credit reporting agencies) but are then renamed under their own name of choosing using their own data on you.
Equifax goes by Beacon
Transunion Fico classic 98 or 04 also has been called Empirica
Experian Fico II
Transunion and Experian use proprietary models
Transunion----New account model 2.0
Developed in 1999
Was designed to better identify credit worthiness.
This model in general allowed more people to score higher allowing for more loans to be approved.
It claimed to identify credit risks better allowing elimination of actual credit risks.
The three CRA's used this version under the names
Experian-----Fair Issac advanced risk score
Transunion----FICO risk score,Next Gen 03
It is notable that the range of this version is 150-950
FICO Expansion Score
This score is for those with not enough or insufficient information to determine a reliable credit score. They are also referred to as thin files or no hits as there is little to no information on them.
This includes individuals such as immigrants (used to paying cash),young adults who haven't developed a credit history and newly divorced or widowed whose credit was solely dependent on their spouse. They are termed by FICO as the credit undeserved.
This version uses info not typically found on traditional reports.
purchase payment plan performance
membership club obligations
land line and cell phone data
judgments, liens and bankruptcy
This score model also uses that same 300-850 range
All this information can be dizzying.
The most important aspect is that when you are applying for a loan before you order your credit score for yourself and most certainly before you apply for that loan ask the lender what model they will be using.
It will keep you from unpleasant surprises and help you to know some of the criteria important to the evaluation of their approval process.
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