Credit Scores are determined using a formulated statistical model used for judging the credit worthiness of an individual.

Creditors commonly use credit scoring when they are processing a credit application. It gives an idea of the risk factor involved while granting a loan. There are different versions of these scores available with the three credit reporting agencies like Beacon at Equifax, Empirica at Trans Union and Fair Isaac Risk Score at Expiran. But the most popular are FICO scores. These agencies have also formulated a variation of the scores that are cheaper and hence they are very popular with the Banks and Credit card companies who have to process millions of applications. The model that creates the score comes under the Federal Reserve Boards Regulation, which prohibits discrimination on the basis of race, color, sex or nationality and also stresses the fact that the scores should be statistically solid.

Each credit bureau has their own standardized version of these scores that match the FICO scores and are available to the consumer and to the lender. While FICO is very secretive about how it calculates the score, it does tell us about the components and in what percentage they contribute to the credit score. Punctuality, Credit Capacity used and Credit History form the major chunk followed by types of credit used and Recent Applications for Credit.

The range of FICO scores is from 350 to 800 with a score of 720 being very good to a score of 575 being poor. Though your credit scores may be low, it’s not the end of the world as you can take corrective measures to raise your scores. There are credit counseling services and credit repair services that help you but it is always advisable to look into the matter yourself and see that your credit report is accurate, your bills are paid on time, you have a good credit capacity and you limit credit enquiries. These few pointers will help you keep your scores high.