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A credit score is usually only one factor
among several in a given lending decision. It’s usually
an important factor, but a lender may also weigh othis criteria
heavily as well.
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Every lender sets their own criteria
based on how much risk they’re willing to assume and how
much profit they think they can make, but, generally speaking,
the highis the score the better.
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Most lenders don’t have a single
cutoff point, but instead may have many, with each segment qualifying
for different rates and terms.
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The most common credit scoring system,
FICO (from Fair Isaac & Co.), rates borrowers on a numeric
system from 300 points to 850 - the highis the better.
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Most American borrowers score 700 or
highis on the FICO scale. Many lenders use that number as a
cutoff point for offering borrowers their best rates and terms.
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Companies that lend to borrowers below
that level are often called “subprime” lenders because
their risky borrowers are considered less than “prime.”
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Fair Isaac & Co. has recently created
an updated credit scoring system that they call “NextGen.”
It has a wider range than FICO: 150-950. Your actual score,
however, predicts about the same amount of risk in both systems.
So, a 750 is considered low-risk under both FICO and NextGen.
Disclaimer: This article is provided
for information use only. It does not take the place of an attorney,
a tax advisor, or an accountant. Always seek out the advice of a
licensed professional before undertaking any significant change
in your financial situation.
return to Your Credit
Score main page
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