Credit Score
A credit score is a numerical expression based on a statistical analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on credit report information, typically sourced from credit bureaus. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers. Credit scores also play a major role in determining insurance premiums and eligibility.
History of Credit Scores
Credit scores were first introduced in the 1950s by the Fair Isaac Corporation (FICO). FICO developed the first credit scoring system, which was used to evaluate the creditworthiness of individuals. Since then, credit scores have become an integral part of the lending process. Credit scores are now used by lenders to determine the likelihood of a borrower defaulting on a loan. Credit scores are also used by insurance companies to determine the risk of insuring an individual.
Table of Comparisons
| Score Range | Credit Rating |
|---|---|
| 800-850 | Excellent |
| 740-799 | Very Good |
| 670-739 | Good |
| 580-669 | Fair |
| 300-579 | Poor |
Summary
Credit scores are an important factor in determining a person’s creditworthiness. Credit scores are used by lenders to determine the likelihood of a borrower defaulting on a loan, and by insurance companies to determine the risk of insuring an individual. Credit scores range from 300 to 850, with higher scores indicating a better credit history. For more information about credit scores, visit websites such as Experian, Equifax, and TransUnion.
See Also
- Credit Report
- Credit History
- Credit Bureau
- Debt-to-Income Ratio
- Credit Utilization
- FICO Score
- Credit Card
- Loan
- Insurance
- Credit Score Calculator
