Credit Score Acton MA

In the United States, a credit score is a number typically between 300 and 850, based on a statistical analyses of a person’s credit files, to represent the creditworthiness of that person, which is the likelihood that the person will pay his or her bills. A credit score is primarily based on credit report information, typically from the three major credit reporting agencies.

Lenders, such as banks and credit cards companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system. While the most widely known score in the U.S. is FICO, there are many others, such as NextGen and VantageScore.


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Credit scores are designed to measure the risk of default by taking into account various factors in a person’s financial history. Although the exact formulas for calculating credit scores are closely guarded secrets, Fair Isaac has disclosed the following components and the approximate weighted contribution of each:

35%, punctuality of payment in the past.

30%, the amount of debt, expressed as the ratio of current revolving debt to total available revolving credit.

15%, length of credit history.

10%, types of credit used.

10%, recent search for credit and amount of credit obtained recently.

Fair Isaac does not use the same scorecard for everyone. The scorecards are segmented so that there are over 100 different scoring models that are applied to different individuals based on different ranges of input values. The implication of this segmentation are that while the approximate weighted contribution above may be an average across all scorecards, individuals receive different scores or weightings based on the scorecard segmentation in which they fall. Some consumers have noticed their scores decreasing by small amounts for no apparent reason.


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A FICO score generally ranges from 300 to 850. It exhibits a left-skewed distribution with a US median around 725. Generally, 660 is regarded as potentially sub-prime and represents and important break point for credit worthiness. The performance of the scores is monitored and the scores are periodically aligned so that a credit grantor normally doesn’t need to be concerned about which scorecard was employed.

Each individual has three credit scores for any given scoring model because the three credit agencies have their own, independent databases. These databases are independent of each other and may contain entirely different data. Many lenders will check an applicant’s score from each bureau and use the median score to determine the applicant’s credit worthiness.


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Cohen Financial Group

508-875-8523 ext. 210
50 Speen Street
Framingham, MA
www.cohenfg.com

The Cohen Financial Group is an acknowledged leader in the fields of pension, estate and & insurance planning. Our reputation is built on 33 years of experience. Our practice has brought together professionals from the fields of law, insurance and accounting. Technical skill, updated research, and an experienced team approach have led to a national reputation.

We function as a resource for estate, retirement and investment planning decisions. Strategies are generally motivated by the need to save income or estate tax. The balance between benefits and costs, inherent in different strategies, is an integral part of our work.

We work primarily with closely held business owners, professionals and high net worth families. We provide a full range of investment*, trust, and insurance services.

*Securities and investment advisory services are offered through Registered Representatives and Investment Adviser Representatives of Equity Services, Inc., Member SIPC, Broker/Dealer and Registered Investment Adviser subsidiary of National Life Insurance Company, 50 Speen Street, PO Box 1484, Framingham, MA 01701, 508-875-8888 Cohen Financial Group is independent of Equity Services, Inc.