Computerized Investing > May/June 2003

On the Internet: Consumer Credit

| | | Add your comment! | A A   Reset
To gauge what kind of credit risk you may be, lenders employ the FICO score. When seeking consumer credit, many people seem to know their credit score, but few understand how it is calculated. This credit scoring, which results in a number between 300 and 900, is based on a statistical model developed by the Fair Issac Corporation (hence the name FICO score).

The statistical model for the FICO score was not originally set up to be a consumer model, but it was the only available paradigm at the time. So, the banking industry quickly adopted the FICO model to numerically rank consumers. The FICO score is used by the three largest consumer credit agencies: TransUnion, Equifax, and Experian.

The mystery behind the FICO score is how it is calculated. As the Fair Issac Corporation is a for-profit company and publicly traded on the New York Stock Exchange, the FICO score is treated as their product and its method of calculation as a trade secret. However, there are a few Web sites where you can get information on the factors that contribute to your FICO score and education on using credit. These sites are described below, along with what you’ll find at the Web sites of the three main credit agencies.

...To continue reading this article you must be a Computerized Investing Subscriber.

Gain exclusive access to this article and all of the benefits and investment education a Computerized Investing subscription offers.

SUBSCRIBE TODAY for just $24.
Log in
Already a CI subscriber? Login to read the rest of this article.

A subscription to Computerized Investing includes a monthly email and access to the CI Website, all of which aim to benefit your investing skills with respect to computers and the Internet.



No comments have been added yet. Add your thoughts to the discussion!

You need to log in as a registered AAII user before commenting.
Create an account

Log In