Credit bureau scores (Credit Scores) are produced from software developed by Fair Isaac and Company or similar software.  That is why they are sometimes called "FICO scores".  Credit Scores are provided to lenders by the three major credit reporting agencies: Equifax, Experian and TransUnion.  These credit reporting agencies often use their own names for their scores as follows:

Equifax:  BEACON®
Experian: Experian/Fair Isaac Risk Model
TransUnion: EMPIRICA®

These three Credit Scores provide the best guide to future risk based solely on credit report data. The higher the score, the lower the risk.  But no score says whether a specific individual will be a "good" or "bad" customer.  And while many lenders use Credit Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product.  There is no single "cutoff score" used by all lenders and there are many additional factors that lenders use to determine your actual interest rates.

 The percentage of the individuals in the U.S. with different credit scores is shown in this graph:

Risk of Foreclosure:
When all is said and done, Credit Scores are an indication of the risk of default or foreclosure.  For a given score, the odds of foreclosure are listed below:

Score:   Odds of Default
above 800: 1292 to 1
760 - 799:  597 to 1
720 - 759:  323 to 1
700 - 719:  123 to 1
680 - 699:    55 to 1
660 - 669:    38 to 1
620 - 659:    26 to 1
below 620:     8 to 1

Most lenders throw out your high score and throw out your low score and use the remaining "middle score".  So in general, when people talk about "your score", they're talking about your current middle Credit Score.  However, there is no one score used to make decisions about you.  This is true because:

• Credit bureau scores are not the only scores used.
  Many lenders use their own scores, which often will include the three credit reporting agencies scores as well as other information about you.
• Credit Scores are not the only credit bureau scores.
  There are other credit bureau scores, although the Credit Scores referred to on this site are by far the most commonly used.  Other credit bureau scores may evaluate your credit report differently than the Credit Scores referred to at this site.
• Your score will probably be different at each of the three main credit reporting agencies.
  The Credit Score from each credit reporting agency considers only the data in your credit report at that agency.  If your current scores from the three credit reporting agencies are different, it's probably because the information those agencies have on you differs.
• Your Credit Score changes over time.
  As your data changes at the credit reporting agency, so will any new score based on your credit report.  So your Credit Score from a month ago is probably not the same score as a lender would get from the credit reporting agency today.

Where does this information come from?
Credit reporting agencies maintain files on millions of borrowers.  The information in your file has been submitted to the credit reporting agency from lenders that you have done business with in the past.  Potential lenders making future credit decisions purchase credit reports on their prospects, applicants and customers from the credit reporting agencies.  The accuracy of your credit file is your responsibility, not the lenders responsibility or the credit reporting agencies responsibility.

Your report details your credit history as it has been reported to the credit reporting agency by lenders who have extended credit to you.  Your credit report lists what types of credit you use, the length of time your accounts have been open, and whether you've paid your bills on time.  It tells lenders how much credit you've used and whether you're seeking new sources of credit.  It gives lenders a broader view of your credit history than do other data sources, such as a bank's own customer data.

Your credit report does not really exist until you or a lender asks for it.  It is then compiled by the credit reporting agency based on the information stored in that agency's file.  This information is supplied by lenders, by you and by court records.  Tens of thousands of credit grantors - retailers, credit card issuers, banks, finance companies, credit unions, etc. - send updates to each of the credit reporting agencies, usually once a month.  These updates include information about how their customers use and pay their accounts.

Your credit report reveals many aspects of your borrowing activities.  All pieces of information should be considered in relationship to other pieces of information.  The ability to quickly, fairly and consistently consider all this information is what makes credit scoring so useful.  We strongly recommend that you make sure that your credit file contains accurate information.  This is your responsibility, not the responsibility of your past creditors or the credit reporting agencies.
 

Why does the U.S. allow Credit Scores?   Who benefits from what some might say is an invasion of your privacy?

Credit scores give lenders a fast, objective measurement of your credit risk.  This allows lenders to lower their perceived risk of making a loan.  This also forces lenders to compete for the borrower's business on a level playing field.  In the U.S. we have excessive competition of lenders wanting to make loans to individuals at all Credit Score levels.  Excessive competition along with the lender's perception of a lower risk level due to more information about a borrower's track record has resulted in the United States having the lowest home loan interest rates in the world.  Before the use of scoring, the credit granting process was slow, inconsistent and unfairly biased.

Credit scores have made big improvements in the credit process. Because of credit scores:

• People can get loans faster.
  Credit Scores can be delivered almost instantaneously, helping lenders speed up loan approvals.  Today many credit decisions can be made within minutes.  Even a mortgage application can be approved in hours instead of weeks for borrowers who score above a lender's "score cutoff".  Scoring also allows retail stores, Internet sites and other lenders to make "instant credit" decisions.
• Credit decisions are fairer.
  Using credit scoring, lenders can focus only on the facts related to credit risk, rather than their personal feelings.  Factors like your gender, race, religion, nationality and marital status are not considered by credit scoring.
• Credit "mistakes" count for less.
  If you have had poor credit performance in the past, credit scoring doesn't let that haunt you forever.  Past credit problems fade as time passes and as recent good payment patterns show up on your credit report.  Unlike so-called "knock out rules" that turn down borrowers based solely on a past problem in their file, credit scoring weighs all of the credit-related information, both good and bad, in your credit report.
• More credit is available.
  Lenders who use credit scoring can approve more loans, because credit scoring gives them more precise information on which to base credit decisions.  It allows lenders to identify individuals who are likely to perform well in the future, even though their credit report shows past problems.  Even people whose scores are lower than a lender's cutoff for "automatic approval" benefit from scoring.  Many lenders offer a choice of credit products geared to different risk levels.  Most have their own separate guidelines, so if you are turned down by one lender, another may approve your loan.  The use of credit scores gives lenders the confidence to offer credit to more people, since they have a better understanding of the risk they are taking on.
• Credit rates are lower overall.
  With more credit available, the cost of credit for borrowers decreases.  Automated credit processes, including credit scoring, make the credit granting process more efficient and less costly for lenders, who in turn have passed savings on to their customers.  And by controlling credit losses using scoring, lenders can make rates lower overall.  Mortgage rates are lower in the United States than in Europe, for example, in part because of the information - including credit scores - available to lenders here.  Knowing and improving your score can also lead to more favorable interest rates.

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The information on this page and in this website is derived from sources that we believe are reliable. This information is not guaranteed.  We are not offering legal or accounting advice and suggest that you contact a lawyer and an accountant before taking any action.