Credit Report Resources

Credit Scoring

What is credit scoring?

Credit scoring is a method used by lenders to help decide whether or not you are a good candidate for a loan.
Lenders employ a credit scoring system to determine your credit score:

Compares information in your credit report to the performance of consumers who have similar credit characteristics.
Examines many credit characteristics including your payment history, the number and kind of accounts you have, the number and frequency of late payments, and any collections or bankruptcies.
Generally speaking, positive credit characteristics make your score higher and help you to qualify for better loans.
Negative characteristics make your score lower and may interfere with your ability to qualify for the best loan terms.

How is a credit scoring model developed?

A lender creates a credit scoring model by using several criteria:

Selecting a large sampling of customers
Analyzing the data in their credit reports to determine which factors relate to creditworthiness
Assigning a degree of importance to each of the factors, based on how accurate a predictor it is in determining who will repay their loan on time.

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