Credit
Bureaus
Introduction: Credit Bureaus and Your Credit
Score
You’ve heard much talk about credit
scores and credit reports, and the affect they can have on
your financial life. But where do these things come from,
and what do they look at?
The Major Credit Bureaurs and the Computation
of Your Credit Score
Although there are smaller credit bureaus,
the three major league players—the ones who have the
biggest impact on your financial future—are Equifax,
TransUnion, and Experian. They us a method developed by Fair
Isaac & Co. called the FICO scoring system. Although the
exact formula is protected by copyright, Fair Isaac &
Co. says their scores are based on these factors and their
weighted percentages:
History of payments, delinquencies,
etc. 35%
Credit limit and how much is used
30%
How long you’ve had credit
15%
New inquiries on your credit history 10%
What kinds of credit you have had 10%
Each bureau uses these percentages in different
ways, and customizes their own scoring system based on this
FICO model. For more information on Fair Isaac & Co.,
Inc., go to their website at www.myfico.com.
Making Credit Reporting More Fair
These three credit bureaus had been peppered
by demands to make credit reporting more fair and accessible.
In response, they have banded together to create a method
and scale that is familiar to most—the academic grading
system. This system rates your level of credit risk in increments
of 99 points, and goes from 501 to 990. Each increment of
99 points gets a corresponding letter grade of A through F.
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