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Welcome. July 30, 2010
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Beacon Credit Score
Your credit score is simply a three-digit number that represents your “credit-worthiness.” It is a statistical measure of the likelihood that you will make your future payments on time. Your credit score is calculated based on patterns in your credit history and by comparing them to patterns of thousands of other people. Although its impact on consumers' financial life can be great, a credit score is really nothing more than an index of risk designed to help lenders assess the risk involved in making loans or issuing credit cards. The higher your score, the lower the risk and the cheaper it is to get credit.
Credit scores come under a variety of names: FICO Credit Score, Beacon Credit Score, NextGen Score, Pinnacle score, etc., and are set by the three major consumer credit agencies: Experian, Equifax and TransUnion. Since credit scores were first developed in the 1990s by Minnesota based Fair Isaac, Inc. (www.myfico.com), a lot of changes have taken place. Each of the three major credit companies calculates credit scores independently using the basic FICO algorithm designed by Fair Isaac – and each company has given a different name to the score.
Fair Isaac has “updated” its scoring model within the past few years. To accommodate the change, each of the three agencies has given a different name to the new scoring model.
Equifax (www.equifax.com): Pinnacle Credit Score (used to be BEACON Credit Score)
TransUnion (www.transunion.com): Precision Credit Score (used to be EMPIRICA Credit Score)
Experian (www.experian.com): FICO Advanced Risk Score (use to be called a FICO Score)
As if the name changes weren't confusing enough, the three agencies started a joint venture in 2006 and came up with the “Vantage Score.” If you obtain your score through TransUnion or Experian, this is the score they will give you, although many lenders continue to use the original version of your credit score. Regardless of which score is used, all of the credit scores continue to be based on the same basic factors (percentage weights are approximate):
- 35% based on: Late Payments, Bankruptcies, Collections, Judgments
- 30% based on: Current Debts
- 15% based on: How long accounts have been open and established
- 10% based on: Type of credit (credit cards vs. finance company loan, etc.)
- 10% based on: Applications for new credit or Inquiries
The high score for the traditional FICO Score, Beacon credit score (or whichever name is used) is 850, while the top score used in the Vantage scale is 990 – to get a basic conversion between scales, you could multiply your Vantage score by 0.86 (850/990) to get a rough approximation of your FICO score – or if you know your FICO score, you can convert it to Vantage by 1.16 (990/850). Make sure that you know which score is being used when you apply for credit!
Your Beacon credit score is just one of the important numbers associated with your overall credit score. It is vitally important that you become familiar with your personal credit score(s), including your Beacon credit score, so that you can accurately represent your personal financial background to potential lenders. If you know your basic credit information, it can greatly increase the speed of the lending process and the likelihood that you will be successful in obtaining the loan you need.
