credit-1Credit Basics Part 1 Experian offers some very simple but sound advice about credit scores.   This week we will be sharing some of their insights with you. 

1. Improve your credit by understanding the basics

What are credit scores and how are they calculated? Credit scores are fluid numbers that change as the elements in your credit report change.

What is a credit score? A credit score is a number lenders use to help them decide: "If I give this person a loan or credit card, how likely is it I will get paid back on time?" Credit scores are also called risk scores because they help lenders predict the risk that you will not be able to repay the debt as agreed. Scores are generated by statistical models using elements from your credit report however scores are not stored as part of your credit history. Rather, scores are generated at the time a lender requests your credit report and then included with the report.

Credit scores are fluid numbers that change as the elements in your credit report change. For example, payment updates or a new account could cause scores to fluctuate. There are many different credit scores used in the financial service industry. Scores may be different from lender to lender (or from car loan to mortgage loan) depending on the type of credit scoring model that was used.

How scores are calculated

How scores are calculated. Developers of credit scoring models review a set of consumers – often over a million. The historical credit profiles of the consumers are examined to identify common variables they exhibited. The developers then build statistical models by selecting the credit variables most predictive of future behavior and assigning appropriate weights to each variable.

Models for specific types of loans, such as auto or mortgage, more closely consider consumer payment statistics related to these loans. Model builders strive to identify the best set of variables from a consumer's past credit history that most effectively predict future credit behavior.

You can read more from the Experian website on this information at

Check back tomorrow for more information on credit basics that will help you.

At HOPE we help educate clients every day on how to make wise financial decisions. If you would like to know more please call us at 704-503-3669. Our staff is waiting on your call.