Credit Score Ratings - Everything You Ever Wanted To Know

How do the Credit Agencies determine Credit Score Ratings?

When consumers are consistently late paying a credit card or car loan, a creditor may report the delinquency to a credit bureau. Delinquent payments show up on the payment history portion of a consumer's credit report. When a consumer applies for a loan or credit card and the prospective creditor reviews their credit report, this activity is registered as a “hard hit” inquiry on the credit report. Too many inquiries can lower a consumer's credit score. When there are too many inquiries, creditors cannot determine which loans have been approved and which have not. The debt-to-income ratio is also another factor. The debt-to-income ratio shows how much debt the consumer has and the income they have to pay that debt. A high debt-to-income ratio is an indicator that the consumer cannot take on more debt and make payments on time.

Payment history, hard hit inquiries and debt-to-income ratio are a few of the factors credit agencies use to determine a consumer's credit score in their Credit Score Ratings system.
 
What is good Credit Score Rating?

Credit Score Ratings often fall between 500 and 850, but credit scores have been seen lower than 500 and more than 850.

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•  500 to 559: This is a low rating for a consumer to have. It may be very difficult for a consumer with a credit score in this range to get a loan or credit card. If they are approved for a credit card or car loan, the terms are often strict and the interest rates are high.
•  560 to 619: Still a very low credit score, the chances of obtaining credit for a consumer with a credit score in this range increase. However, the consumer still presents a high risk, so interest rates may still be very high.
•  620 to 659: Consumers with credit scores in this range have a better chance of getting a loan with better interest rates. The rates, however, may not be the best.
•  660 to 669: Consumers with credit scores in this range may still have problems obtaining a loan. They may find the terms not as strict and interest rates more reasonable.
•  700 to 759: Consumers in this range generally are approved for credit cards and loans that may have lower interest rates and more reasonable terms.
•  760 to 850: Consumers with credit scores in this range generally can get the best interest rates available on credit cards and loans. Credit Score ratings above 800 are usually considered as flawless credit.

Who uses Credit Score Ratings?

Generally, when a consumer applies for a credit card, fills out an application for a car loan, makes application with a lender to obtain a home loan, these creditors may request a copy of the consumer's credit report from one of three major credit reporting bureaus. The report contains the consumer's credit score.  Creditors use the Credit Score Ratings system to determine risk, or how likely the consumer is to pay back the loan.

For more information on NCO Financial Systems, Inc. and Credit Score Ratings, please browse through our ConsumerHelpUnit website.

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