I still get asked to break this down all the time. So I figured a post about it was due yet again.
A credit RATING is a number which most lenders use to determine whether they will extend you a line of credit or give you a loan. The rating is generated by three separate credit reporting bureaus. When applying for a loan, a lender will usually acquire a report from at least two of these sources. Different lenders favor different bureaus for their needs. The accuracy is a opinion really, hence the reason two or all are used in most cases.
The FORMULA used to calculate this score in-house at these bureaus is known as FICO. So a FICO score is a credit rating based on the Fair Isaac Credit Organization formula. The resulting number is one ranging from 300 to 900. This number outlines the amount of risk you pose to a prospective lender; 300 being the most unfavorable. Your financial history and current assets and liabilities are what are fed into the FICO formula, thereby generating the score.
No tags
