A credit score is a snapshot of your financial trustworthiness represented as a number. Lenders use this number to help them determine the risk in lending money to you. It is an objective, non-biased lending tool used by lenders to provide you with a faster, fairer, and more consistent response.
The Credit Score is made up of six main categories of information from your credit report:
A credit score is not calculated if any of the following are true:
The following information does not influence the credit score:
— Requests you have made for your credit report (Consumer Disclosure inquiries)
— Requests made by lenders to provide you with a “pre-approved” credit offer (Promotional inquiries)
— Requests made by lenders to review your account with them (Account Review inquiries)
— Inquiries posted for employment or insurance purposes
No, there are literally thousands of score models used in the credit industry which consider different variables for different types of credit.
If you would like to know which scoring model the creditor is using, contact the creditor involved directly.
There are many different scoring models that predict different types of consumer behavior, such as likelihood to carry a balance on a revolving account, or the likelihood to fall behind on an account. The scoring models are based on many factors including debt to income ratio, number of delinquent payments, or number of open accounts. Each creditor has different criteria for granting credit and might view the credit information differently. Any creditor using a score to deny credit must tell you which item(s) in your credit report contributed to the decision.
When a lender or insurer requests your credit score, it is calculated by computerized, statistical scoring models.
Numerical weights are placed on different aspects of your credit report and a mathematical formula or computation is used to arrive at a final score.
The score is one of many pieces of information the lender may use in evaluating your credit application. It gives lenders a fast and objective measurement in determining the risk in lending money to you. Because of credit scores, you might get a loan faster and the credit decision may be fairer.
Since there is no one score cutoff used by all lenders, it is hard to say what a good score is outside of the context of a particular lending decision. Your lender may be able to give you guidance on the criteria for a given credit product.
TransUnion will be glad to provide you a copy of your consumer disclosure with your TransUnion VantageScore for a fee of $9.95 plus the price of the credit report.
VantageScore is the first — and only — industry credit score model that was jointly developed by all three national credit bureaus. A credit score is calculated using a scoring model that measures the positive and negative factors from your credit report. This score represents the likelihood that you will repay a debt as agreed.
901 – 990 A
801 – 900 B
701 – 800 C
601 – 700 D
501 – 600 F
All updates or changes made to your credit report are immediately considered when calculating your next credit score.
An inquiry is a statement of fact. It indicates that a company with a permissible purpose has accessed your credit file. For example:
While past payment history and use of credit are strong indicators for future payment performance, inquiries have a relatively small impact on your credit score.
No, the only inquiries that might affect your credit score are those initiated by you for specific credit transactions including mortgage, credit card, auto applications, and insurance. The score does not include inquiries when:
Most scoring models take the appropriate steps to make sure your score is not lowered because of the multiple inquires that might occur in a specific time period as a result of shopping for the best terms in an automobile loan, home loan, or insurance coverage.
Loan officers decide if you get your loan. Credit reports and credit scores are tools the loan officer uses to help make the credit granting decision. Lenders vary in how they interpret the information on the credit report and credit score. Variations might also include how they weigh the importance of income, length of employment, and value of assets and collateral.
If you would like to know the specifics of how scoring models are developed or information about your FICO score, you should contact Fair Isaac at (800) 777-2066. You can also visit Fair Isaac’s Web site at www.fico.com or at www.myfico.com.
An insurance score is a number that represents your likelihood of having an insurance loss in the future. It is calculated by applying a mathematical formula to the data from your credit report. Your score simply represents a snapshot of your credit report on the day it was calculated. Your insurance score may be used as part of the underwriting decision when trying to obtain insurance.
There are many different insurance scores in use. Each scoring model measures different factors, depending on how it is used. The scoring models are built and tested to be predictive for their particular applications. You should contact your carrier if you have specific questions on the insurance model they use.
There are various factors which help to determine an insurance credit score:
Note: These factors can have either a positive or negative impact on your insurance credit score. Factors that have a negative impact on your score are accompanied by Reason Codes.
A reason code is three-digit code accompanied by a description of a specific credit factor that can be improved upon. It explains why you did not receive the most optimal score for a particular factor. A reason code will only be returned if you did not receive the very best possible result for a variable. Federal and state laws generally require that reason codes be returned unless the very best possible score is achieved.
Example of a TrueRisk description: Months since most recent delinquency is between 0 and 4. Optimum value is no delinquencies. Score will improve with time as delinquencies get older and there are no new delinquencies.
Note: Not all carriers will send the three-digit code, they may just send the description.
It has become increasingly common for insurers to examine your credit data. This is because studies have shown that credit history helps to predict the likelihood of future insurance claims and losses. It's important to remember that insurers use your credit data differently than a creditor or a lender, making it necessary to use different scoring formulas to evaluate your credit history.
Insurance scores range from 150 to 950, which is different than credit scores which typically range from 300 to 850. Since insurance companies look at different aspects of your credit history than lenders or creditors, they have developed different formulas to evaluate your credit. This larger range is helpful because it enables people to differentiate between their credit scores and insurance scores. It also helps to determine exactly how your insurance risk compares to other insurance seekers.
Just as lenders look at credit differently for mortgages and auto loans, insurers look at credit differently when they are evaluating a consumer for an auto insurance policy or a property insurance policy. TransUnion's Insurance Scores allow you to see both your auto and property scores and the factors that impact each.
There are multiple factors that go into the calculation of an insurance score. Generally, the higher the score will mean a lower rate, the lower the score the higher the rate. Credit is one of many variables that carriers use to determine the rate of a policy. Many other factors may be evaluated as well including: age, gender, geographic location, driving record (auto insurance) or property value (home insurance).
If you feel there may be a discrepancy with the Reason Codes, you should contact your insurance carrier and follow their dispute process. If you feel there is a discrepancy on your credit file, I can initiate an investigation for you on those items in question.
Your credit score is only one of many factors that go into an insurance rate. You will need to contact your insurance carrier to find out why they increased your rate. TransUnion is not part of the decision-making process.
Yes, you can contact your insurance carrier and they will provide you with a copy of your score.
Click here to see an example