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Credit Scoring System |
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Because The Equal Credit Opportunity Act prohibits creditors from considering personal information such as race, sex, marital status, national origin, or religion when they are in the process of determining your credit worthiness, lenders have turned to a fair and balanced mathematical Credit Scoring System formula that automatically determines your credit risk by calculating a credit score based upon your debt load, payment performance, and other criteria.
The most commonly used credit scoring system is called the FICO Score which was created by Fair, Isaac and Company.
FICO scores run between a low of 300 and a high of 850. The higher the score, the better you look to creditors.
Not only does your FICO score determine whether or not you will be granted credit, many lenders use this credit scoring system to determine how much interest you will be charged. The higher your score, the lower the interest.
Your credit score can change regularly depending upon the criteria that a particular credit scoring system uses. The most common reason for your score to change is that you have either raised or lowered your outstanding debt or you have changed a payment pattern for better or worse.
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Credit Card Definitions > A - E > Credit Scoring System
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