What is a Credit Score and how is Generated?
As part of series of articles (blogs)
regarding Credit and Credit Score, here we
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What is a Credit Score?
A credit score is a number which is calculated,
utilizing some sophisticated statistical
algorithms, based on your recent (e.g., last two
years or so) payment history, history of
managing your credits and behavior of paying
your loans, credit cards, store charge cards,
bills, obligations, etc. The credit score
predicts the likelihood of a person’s debt
repayment behavior based on the person’s recent
Credit scoring can help you understand your
overall credit rating and help companies better
understand how to serve you. Overall benefits of
credit scoring have included faster credit
approvals, reduction in human error and bias,
consistency, and better terms and rates for
consumers through reduced costs and losses for
Figure 1: Credit Score Analyzer
How Many Credit Score Companies Are There?
There are hundreds of companies in the U.S. and
around the world that have developed their own
algorithms to analyze different sets of data and
generate scores for different purposes. While
lenders may use different scoring models to
determine how you score, and each major credit
bureau has its own method for calculating credit
scores, the scoring models have been fairly well
standardized so that a score at one bureau is
roughly equivalent to the same score at
another, but are not necessarily the same.
Not all credit scores are created
In this book we only describe briefly the most
popular, FICO Score, VantageScore, Beacon score
and few interesting credit score companies.
HOW to overcome the problems with your credit
history and credit score?
Knowledge, education, awareness, practice and
discipline are the essential keys to being
successful on any subject. The book,
"Credit Score Tips and Tricks",
provides you information, tools, techniques to
educate yourself and manage your credit report &
credit score, and therefore manage your finances
effectively at no additional cost.
I have decided to bring and share with you,
chapters or sections of my book,
Credit Score Tips and Tricks,
as series of
articles here. This is the number
15 of such a
I also created and manage a GROUP in ActiveRain,
Credit Reports and Credit Scores, Please
feel free to join and share your thoughts and