How Do Credit Scores Work?

Although several scoring methods are available, most lenders use the FICO method from Fair Isaac Corporation. It has become a sort of standard method for determining credit score. Three major credit bureaus (Experian, Equifax and TransUnion) worked with Fair Isaac Corporation in the early 1980s to come up with the idea of a scoring method.A credit score is determined much like a grade in school. A teacher, after considering several factors like attendance, assignments submitted, class response etc, and assigns a particular score to every student. A similar procedure occurs for a credit score too. The only difference being, that unlike the school grade card, it uses the information in an individual’s credit report.