Lenders use one of three major credit bureaus to check credit - Equifax, Experian and TransUnion, explains Credit.com. Each agency employs a fixed formula to compute a credit score that the lender uses to determine creditworthiness, states myFICO.comContinue Reading
The credit bureaus use five factors of varying weight to determine the overall score: payment history, amounts owed, length of credit history, credit mix and new credit. Scores range from 300 to 850; those with scores of 760 and above are likely to get the best rates for loans and lines of credit, explains Credit.com
Since each credit bureau uses its own formula to determine credit scores, it is possible for scores to differ substantially between bureaus - maybe by as much as 40 points, states FreeScore.com. In addition to credit score, lenders may also consider the personal income, length of employment and kind of credit the applicant is requesting, explains myFICO.com.
Consumers should monitor their credit reports regularly to ensure personal information and financial accounts are accurate and no bogus accounts appear, warns USA.gov. The Fair Credit Reporting Act entitles consumers to a free report from each of the agencies every 12 months, states the FDIC. Consumers may request reports online at AnnualCreditReport.com.Learn more about Credit & Lending