Credit Score Standards

Credit decisions are made by your prospective lender or the company with whom you plan to do business. They look at the credit ‘score’, which is based on numerous factors such as:

• whether you pay your bills on time
• when and how often you have defaulted on payments or loans
• whether you have or have had collection action taken against you
• how many credit cards you have and your credit limits
• when you have applied for loans or other credit funding
• the total amount of your outstanding debt
• and…other factors

Although there is a standard 7-10 year time limit for most items appearing on your credit report, there are certain types of information that will appear on your credit report indefinitely. In general, these items relate to loans or salaries that exceed a certain amount. Here are some examples of items that will remain on your credit report for more than 7-10 years:

• Salaries over $75,000 per year
• Loans or credit transactions that equal, exceed or WILL exceed $150,000
• Liens against property or tax liens that remain unpaid

Each factor listed on your credit report is awarded a point value. The total of all points is your resulting credit ‘score’.

This score helps your prospective lenders to predict whether you will pay off a loan or credit card balance.
Each lender or creditor may have a different ‘ideal’ for the credit score they prefer to see when they consider a loan application.

Most use a sampling of their own average customer base to determine the credit risk they are willing to take.
The lender or creditor looks at each factor in the credit score and decides how important that particular factor is to their business model and whether it is a predictor that may help them determine whether a particular client will pay their bills on time.

Lender scoring models can consider more information than what is contained in your credit report, e.g. your occupation, how long you have been employed by a particular company, whether you own a home and how long you have lived in that location.

Some creditors will use different scoring models for different types of purchases, credit or loans. Others use a standard model developed by the credit scoring companies, wherein the total credit rating becomes the primary factor in their funding or loan decision. 

Recently, the three national CRAs joined together to create a uniform scoring model, called the VantageScore, for their credit rating scores:

901 – 990 = A 801 – 900 = B 701 – 800 = C 601 – 700 = D 501 – 600 = F

For the first time, the scoring criteria and algorithms are the same across all three credit-reporting companies.
The range of 501 to 990 now reflects a standard paradigm of grading (A, B, C, D, F) for ease of interpretation.
Before credit scoring was established, a lender had to use subjective criteria to approve a loan.

Although you may feel a bit vulnerable or hesitant about the idea that others can access your credit history, the credit scoring method we use today to review and approve credit is more balanced and fair than any previous system lenders used.