Credit score versus credit score
what is a credit rating against one credit rating? The two terms can be used interchangeably in some cases, but there is a distinction between them. A credit score, expressed in the form of a rating, reflects the solvency from a business or government. A digital credit score, also an expression of credit worthiness, can be used for individuals or small businesses.
Some credit scores, for example, Dun & Bradstreet PAYDEX, Experian’s Intelliscore Plus, or the FICO small business rating service apply to businesses only. The PAYDEX uses a scale of zero to 100, while the Intelliscore Plus and FICO SBSS use a scale of 300 to 850 and zero to 300, respectively. Credit scores for individuals range from 300 to 850.
As a consumer, your credit score is a number based on information from your credit reports at the three major credit bureaus: Equifax, Experian and TransUnion. When it comes to applying for a personal loan, mortgage, or new credit card, you’ll be interested in your personal credit score.
Odds and scores are designed to show potential lenders and creditors the likelihood that a borrower will repay a debt. They are created by independent third parties rather than by creditors or consumers. Credit scores are paid by the requesting entity as well as by the creditor.
Key points to remember
- Credit scores are expressed in letters and used for businesses and governments.
- Credit scores are numbers used for individuals and some small businesses.
- An individual’s credit score is based on information from the three major credit reporting agencies, and the scores range from 300 to 850.
- A FICO score takes information from the three major credit bureaus to create an individual’s credit score.
- Credit ratings are produced by credit rating agencies, such as S&P Global.
What is a credit score and how is it determined?
When creating a credit score, all agencies can define their own scales, but the most commonly used dimensions are produced by Global S&P. It uses AAA ratings for the companies or governments that have the greatest ability to meet their financial commitments, followed by AA, A, BBB, BB, B, CCC, CC, C and D for default. Advantages and disadvantages can be added to distinguish the differences between the ratings from AA to CCC.
To calculate these scores, S&P examines the borrowing and repayment history of a business or government. Fitch reviews and Moody’s are two other companies that create credit scores. All three organizations also assign perspective ratings – “negative”, “positive”, “stable” and “developing” – to countries. These indicate the potential trend in a country’s rating over the next six months to two years.
What are consumer credit scores?
Unlike credit scores, credit scores are usually expressed in numbers. The most common credit score used in consumer loan decisions is the FICO, Where Fair Isaac Corporation, Goal. FICO takes information from the three major credit bureaus and uses it to calculate an individual’s credit score.??
The three bureaus also generate their own personal credit scores, called VantageScores.These will give you a general idea of your credit situation and the factors that affect it, but most lenders, around 90%, look at a FICO score rather than these scores when assessing a consumer’s creditworthiness. .??
Credit factors such as your payment history, how much you owe, how long your credit accounts have been open (your credit history), new credit, and the combination of credit types all go into a FICO score. These scores range from 300 to 850; the higher a consumer’s score, the better the interest rate offered.??
Credit scores are generally grouped into exceptional, very good, good, fair, and very poor categories.
Each lender will have their own guidelines for granting credit, but generally scores above 740 are considered very good or exceptional, while scores between 670 and 740 are considered good and indicate that the borrower is relatively healthy. security. Scores below 670 but above 579 are correct. Borrowers with scores in this range may have some deficiencies in their credit history. Scores below 580 are considered very low.
The bottom line
Although the scales can vary, the most commonly used scales for credit scores consider borrowers ranked in the bottom third of the scale as risky. Borrowers with FICO scores of 300 to 579, for example, are considered risky, while those with scores ranging from 580 to 850 are considered fair to excellent.
On the S&P credit rating scale, borrowers rated below BBB, in the bottom two-thirds of the scale, are considered non-investment grade, while those between BBB and AAA on the scale are considered “investment grade”.