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Credit Scoring

What is a Credit Score?
Information about you (such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts) is collected from your credit application and your existing credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles and award points for each factor that helps predict who is most likely to repay a debt. A total number of points, called a Credit Score, helps predict how likely it is that you will repay a loan when due.

Each of the three major credit reporting agencies draws from the same credit scoring model designed by a California based company, Fair Isaac Company (FICO). From this comes the term "FICO Score", which is defined as a credit score based on the Fair Isaac model. For the sake of branding, however, each credit reporting agency calls the credit scoring product by a different name. These names include:

Equifax - BEACON
Trans Union - EMPIRACA
Experian (or TRW) - TRW/FICO

You should also be aware that the Fair Credit Reporting Act (FCRA) is designed to promote accuracy and ensure the privacy of the information used in consumer credit reports and is enforced by the Federal Trade Commission. Recent amendments to the Act expand your rights and place additional requirements on Credit Reporting Agencies as well as businesses that supply information about you to these agencies. Additionally, if you tell an information provider in writing that you dispute an item, a notice of your dispute must be included anytime the information provider reports the item to the reporting agency. All of this can affect your credit score in your favor.

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If you have questions about credit scoring, please contact us.

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