Most people know that credit scores determine what and how much you can borrow from lenders, but very few are actually knowledgeable about how credit scores are calculated. When you attempt to borrow money from a financial institution or to obtain a credit card, the financial companies retrieve a copy of your credit report, which contains a score that qualifies (or disqualifies) you for the loan or line of credit.
Credit scores range from 340 to 850, and are used to determine the risk lenders take on when they give you money or credit. An individual with a credit score of 480 will pose a much larger risk to the lender than an individual with a credit score of 700. If you don t know your credit score, it might be a good idea to find out.
The three credit bureaus – Equifax, Transunion and Experian use a special type of software that uses the information in your credit report to generate a numerical score. Credit scores are sometimes called FICO scores because the first credit score software was produced and distributed by Fair Isaac Corporation FICO.
Credit scores are calculated using the following formula…
Finish: Credit Scores: How Are They Calculated? here
