What is a Credit Score and how is Generated?
Part 15: As part of series of articles (blogs) regarding Credit and Credit Score, here we go:

Disclaimer:

Every effort has been made to make these articles as complete and as accurate as possible, but no warranty or fitness is implied.
The information provided is on an “as is” basis. The author shall have neither liability nor responsibility to any person or entity with respect to any loss or damages arising from the information contained in this book.

The author is not engaged in professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought.

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 payment history.

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 lenders.

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 equal!

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 series.

I also created and manage a GROUP in ActiveRain, Credit Reports and Credit Scores, Please feel free to join and share your thoughts and experiences.

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