Important factors of a credit score

A credit score is a three-figure number that indicates how probably you repay your debt. Credit score initially based on a credit card report and from credit bureaus all the credit information is collected. You may have to take a bank loan or apply for a credit card. In that case, banks and lenders have to make a decision whether they will approve the application for a bank loan or credit card. Banks and the credit card companies take help of credit score to measure the risk factor created by lending money to the customer and to reduce losses because of the bad debt. Bank and the credit card companies use credit scores to decide who is qualified to get the loan, in what rate of interest and the credit card limitations. They also decided by the credit score that which consumers are mostly bringing the highest revenue. Not only banks can use the credit score but the other companies like mobile phone companies, landlords, insurance companies, government department also can use the same technique. Online lenders of digital finance companies use different data sources to measure the credit score of the borrower.

How a credit score is generated?

There are three credit bureaus who create the credit score of yours. Those credit bureaus are Equifax, TransUnion, Experian. These credit bureaus make your credit report according to credit card report and loan repaying report, that scoring structure is like VantageScore and FICO and generally, the range of the score is 300-850. Your credit scores are depending on how often you give the payment on time and how many bank accounts you have in a good standard. The credit score information is only based on these properties, it does not depend on personal information like gender, religion, caste, marital status.

Reasons for having different score

As there are multiple numbers of different ways to calculate a credit score, it’s also possible to have more than one different credit score at the same time. You may have different credit scores if any bank or credit card company doesn’t report to all three credit bureaus or give them update at different times. Not all lenders report properly to all the bureaus, only report to one or two credit bureaus.  Depending on the lending situation, you could have different credit scores. For example, just one scoring model is used by an auto lender, at the same time a mortgage lender uses a different model.

Difference between the scoring models

With the collaboration of Equifax, Experian, and TransUnion, a VantageScore can be created. VantageScore model possesses that its 3.0 scoring model can be scored millions which is more than other different models by including up to past 24 months activities.  VantageScore has three types of scoring model and FICO has more than three scoring models. But the scoring factors are almost similar to calculate the score. The factors are

  • Your payment giving the record
  • The time period of having credit
  • Which type of credit you have, like a credit card, student loan, bank loan, mortgage
  • The credit limits and how much are you using the credit limits.
  • Your debt amount

As your credit score puts an effect on all these things, now the question is “does credit score affect car insurance?  The answer is yes. The credit score considers for car insurance too. When the car insurer gets your credit filing history and the credit score, they combine both to calculate the total insurance score. The range of the insurance score is from 200 to 997. If the insurance score is higher than 770  or in the range of 770 then that score is considered as a good score. If the score is lower than 500 then it is considered as a poor insurance score.