Credit scores were developed by Fair Isaac & Co (FICO). Credit scoring is a method of determining the likelihood that credit users will pay their bills. Fair, Isaac began its pioneering work with credit scoring in the late 1950s and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrowers credit history into a single number.
Credit scores analyze a borrower's credit history considering numerous factors such as:
FICO scores range from about 350 to 850 points.
If the applicant's credit score is above 680, they are considered a good risk in terms of someone who wants to rent or lease from you.
If their score is below 680, they fall in the middle (average risk) category in terms of risk of renting/leasing.
Anything below a 560 is considered high
risk and this person is not someone who is a good credit risk.
Excellent: over 750
Very good: 720 or more
Acceptable: 660 to 770
Uncertain: 620 to 660
High risk: less than 620
Collection Items and public records include judgments, bankruptcies, suits, liens, collection items and wage attachments including specific details on late and missed payments. Charge-offs indicate that the creditor has written off the debt as uncollectable and has taken it a loss.
Negative information/late pays are determined using three factors:
Recency – How long ago was the last delinquency. How old is the late pay? A 30-day late payment made just a month ago is more of a determining factor than a 90-day late payment from five years ago.
Severity – What level of delinquency was reached? How late was the payment made? 30 days, 60 days, 90 days or worse. Is the payment still outstanding?
Prevalence – How many credit obligations have been delinquent? The amount of negative items as compared to their total amount of available credit.