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Clarifying the Credit Score Conundrum

June 1, 2016 9:29 am

fotolia_101395462What is a credit score?
Credit scores are utilized by credit lenders as one method of determining credit worthiness and risk.  A consumer’s credit profile is evaluated based on a number of factors and assigned a three digit number.

Factors which determine a credit score include such things as:

  • Payment history
  • Number of Derogatory accounts
  • Length of established credit history
  • Total number of credit accounts
  • Amount of available credit
  • Number of Hard Inquiries

Why do credit scores vary from lender to lender?

Multiple scoring models are available to lenders, with each model weighing credit data differently.  The credit score you pull as a consumer from a credit bureau is a general evaluation of your credit. A bank may use a different scoring model to evaluate credit for a loan. In addition, credit data can vary between credit bureaus so even the same scoring model may vary depending on the credit bureau used by a lender.

Why do credit scores matter?

Credit scores can potentially determine if an application for credit is approved or denied and often dictates the interest rate as well.  For a rental application, a credit score may determine not only potential approval for housing, but if a landlord will require an additional deposit or a guarantor.

What scoring model does use?® utilizes VantageScore 3.0 – a predictive, consistent credit risk score that provides lenders with a resource to make effective and consistent risk-management decisions. This model is based on a scoring range of 300 – 850; higher scores indicating a lower risk, lower scores indicating a higher risk.

What else should I know?

As a consumer:

Regularly reviewing your credit with all three credit bureaus is a great place to start! You have a right as a consumer to dispute inaccurate information. Staying on top of your credit data will ensure lenders have the most current, accurate information when making their decision. For more information, see A Summary of Your Rights Under the Fair Credit Reporting Act.

As a landlord:

Credit scores are a valuable tool and can help in making your rental decision. However, they are not the only resource available in evaluating a prospective tenant. Looking beyond the credit score –at the whole picture, including verifying rental and employment references and public records will assist you in making an informed leasing decision for your rental property.

Visit Moco Incorporated or for more information regarding this and similar topics.

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