Credit scoring is a system creditors use to help determine whether to give credit. Information about the consumer and their credit experiences, such as bill-paying history, the number and type of accounts, late payments, collection actions, outstanding debt, and the age of credit accounts, is collected from a credit application and credit report.

Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles.

A total number of points – a credit score – helps predict how likely it is that the borrower will repay a loan and make the payments when due.
How is a credit-scoring model developed?

A random sample of similar customers is analyzed to statistically identify characteristics that relate to creditworthiness.

Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk.

The following table illustrates the five main categories of information that one scoring model, developed by the Fair Isaac Corporation, uses in most situations.

FICO scores range from about 300 to 850. A FICO credit score above 650 will help to qualify for most loans.

A person’s credit score cannot be evaluated or based on any of the following factors.

• Race
• Color
• Where you live
• Gender
• Age
• Income level
• Country of national origin
• Sources of income
• Religion
• Marital status
• Child/family support obligations
• Down payment information
• Savings
• Length of time in present house

Google