What is a Credit Score?
A credit score is a number lenders use to decide whether you will pay your loan on time. It is generated through statistical models using elements from your credit report. Your score is not physically stored as part of your credit history on the credit file but instead is typically generated at the time a lender requests your credit report and then included as part of the report. Your credit score changes as the elements in your credit report change. For example, payment updates or a new account could cause your score to fluctuate. Credit scores are affected by such information as the number and severity of late payments, type, number and age of accounts, total debt, and recent inquiries.
A credit score is a number determined by a statistical model to predict the likelihood of a borrower repaying a credit obligation. It is based on previous credit performance, current level of indebtedness, amount of time credit has been in use, pursuit of new credit and types of credit available. The goal of a credit score is to rank an individual in relation to others and to industry standards for the purpose of making lending decisions. The higher the score, the more likely the borrower is to pay his/her bills on time. Thus, lenders offer borrowers with higher scores better interest rates and stipulations.
A. A credit score is the translation of your credit repayment history into a numerical value. In order to streamline the decision making process, the lending industry has developed a system which scores the borrowers credit history. The score is seen as predictive of the borrowers ability and willingness to repay the loan. Such scoring gives the lender the ability to give the borrower a rapid credit decision by using automated underwriting software currently available. Few lenders base their entire credit decision on the score, however, lower FICO scores usually trigger a real live underwriter review of the loan application and credit report before a final decision is made.
