How to Understand a Beacon Score
The term Beacon score refers to your credit score. It is often referred to as your FICO, which is an acronym for the credit score model developed by the Fair Isaac Corporation. Your credit scores tells the lending institution the probability of your paying your debt by the due date each month. The Beacon score is a factor in determining your ability to secure credit. It also determines the interest rate you will be able to obtain on your credit.
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Instructions
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Acquire your free credit report. You can obtain your credit report for free by visiting the Annual Credit Report website (see Resources). You are allowed one free credit report annually from each of the three largest credit report agencies. The three major credit reporting agencies are Experian, Equifax, and TransUnion.
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Understand the components of your Beacon score. Your credit score is based on a calculation as disclosed by the Fair Isaac Corporation. It is based on a number of factors with approximate weights given to each as disclosed by the FICO. Late payments, bankruptcies and collections, current debt, length of account existence, type of credit such as installment, revolving or finance company, and applications for new credit and inquiries all play a role in the calculation. As expected, late payments and current debt are heavily weighted in the calculation.
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Know a good credit score. From a minimum of 300 to a maximum of 850, there is a wide range in credit scores. In general, a credit score of 650 is considered to be the lowest credit score required to obtain a fairly good credit rate.
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Compare your credit score to that of the range. There is an inverse relationship between the credit score and cost of borrowing. That is, a higher credit score results in a lower interest rate or cost of borrowing. See the Resources section for the link to the Fair Isaac Corporation interest rates and credit scores.
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Obtain your credit report every 12 months to review for errors.
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Tips & Warnings
There are a range of bad, acceptable and good credit scores because lenders weight different components of the credit scores differently. Additionally, some lenders are more stringent than others.
You can improve your credit score. Paying bills on time, paying off your revolving debt, keeping balances low and managing credit cards responsibly are concrete examples of ways to improve your credit score.
Resources
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