Fico creditscores
A Person's credit bureau scores are typically called "Fico creditscores" because most credit bureau scores used in the United States are generated by software created by the Fair Isaac Company. Fico creditscores are offered to lenders by the three primary credit reporting agencies: Equifax, Experian and TransUnion. If a person ever applied for a credit card or a loan, at least one of these three reporting agencies has provided his potential lender with a credit report.
In addition to the credit report, lenders can purchase a copy of creditscore based on the information provided in the credit report. Fico creditscore is calculated by a mathematical equation that assesses all different types of information that exist on a person's credit report with each specific agency. At the end, a person's Fico creditscore is a number that represents his level of future credit risk.
A person's credit report must contain at least one account that has been open for a period of six months or more if a Fico creditscore is to be calculated on his credit report. His credit reportshould also contain information on all accounts that have been updated in the last six months. In addition, the report must contain at least one account that has been updated in the past six months.
At least that much information is needed in order to get a FICO score. The higher the score a person has, the lower the risk he is perceived to be by lenders. A person's FICO creditscore and his risk have an inverse relationship. If he has a low FICO score, then he is a high-risk candidate and vice versa. Lenders use Fico creditscores as a tool to help them make lending decisions. However, Fico creditscore isn't the only thing lenders look at when deciding whether or not to grant a loan. In fact, many lenders use their own scores and their own formulas. These formulas will probably include Fico creditscore, but the Fico creditscore won't comprise the entire formula.
Different lenders have different standards. What one lender feels is an acceptable level of risking another lender might find unacceptable. Lenders have different strategies when it comes to granting loans and some are willing to take more risks than others. Many people think that there is a cutoff point which lenders used when examining FICO creditscores. That is absolutely not true. A person's Fico creditscore changes all the time. If he was delinquent on some credit card payments his Fico creditscore will drop and lenders will consider him to be a risk. However, the Fico creditscore will rise if he consistently makes all the payments on time over a period of time.
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