Demystifying The Credit Score Financial Gauge

There seems to be a sudden interest in attaining good credit score numbers and the rush is quite understandable. A few years ago, the number of businesses that needed financing and the number of people who needed financial assistance to acquire homes was not as high as can be witnessed today. Even then, there was no standard system that was used by lenders to analyze the credit risk of an individual or business. While it is common to have a score card that can be used to assess individual risk, there is also need to have a standardized assessment so as to avoid bias. Before the establishment of a streamlined credit reporting algorithm in the 1980s, it was almost impossible to answer the question “what is a good credit score range?” While this makes perfect sense, the greatest concern for borrowers is why the credit score of a single individual differs from one agency to another. Currently, the US market credit reporting is handled by three bureaus and from time to time, they report different scores. Good credit score numbers, even with slight differences, do not cause as much panic as average and bad owing to the financial implications involved. Before a borrower concludes that their scores are different with each bureau, they must consider the following; If a credit score report is generated on different dates, it could be different from another which was generated before or after. The score changes every time and even a few hours could make a major difference. To get accurate scores that can be used comparatively, the use of reports generated on the same date should be emphasized. Ever bureau has their unique scoring system for arriving at a credit score. The best approach to making a comparison is to request for a report that has been calculated using a certain scoring system. This too cannot guarantee uniformity all the time because different bureaus store raw data and manipulate it differently. Ideally, all three bureaus should receive credit updates at the same time but while some lenders will report to all three, others report to one or two. The delay of information reported at different times may cause good credit score numbers to appear as bad and vice versa. The same case applies when there is missing information that could have altered a credit score to read a certain way. Errors happen all the time and especially in mathematical computations. It is also likely that your score variation between credit bureaus could be due to an error. To spot an error, the borrower has to go through the entries in the report to cross check against their credit history and activity. The American financial market right now features close to a dozen companies that are licensed to provide credit scores. This means that even if all of them received accurate information on a borrower, the above factors would still lead them to have different scores for the same account. With such great discrepancies evidently characterizing the system, the only way is to consider not a single number but a range. So, what is a good credit score range? There are no good credit score numbers because most lenders have tailor made their credit facilities to suit every range. To stay in business and safeguards their revenue stream credit reporting agencies will usually position their scoring system as the most predictive. The reality is that a credit score is arrived at using the same data and guidelines and it is up to the borrower to choose which report to stick to according to the requirements of their lender. While the different scoring agencies might come up with different good credit score numbers based on the same parameters and formulas, the general agreement is that that a high figure is an indication of what is a good credit score range. Consumers should be aware that even though the credit scores indicate the financial health of a certain individual or company, they are a measure of different scenarios. These scenarios change all the time and when they do, the score either goes up or down. Sticking to a single system might seem limiting, but it is the best way to pick up trends to uphold maintain good credit score numbers.