How Good is Your Credit, According to Beacon?

How Good is Your Credit, According to Beacon?

Equifax, which is a credit agency, is responsible for the development of a credit scoring model known as the Beacon Credit Score. These scores, which come from the FICO credit scoring model, use a unique algorithm to judge a person’s creditworthiness based on their past financial history.

Equifax, which is a credit agency, is responsible for the development of a credit scoring model known as the Beacon Credit Score. These scores, which come from the FICO credit scoring model, use a unique algorithm to judge a person’s creditworthiness based on their past financial history.

The Beacon Score, defined, along with some examples

The Equifax brand name for FICO credit scores is referred to as Beacon, which can also be stylized as BEACON. The Fair Isaac Corporation is in charge of creating FICO scores, which are used by approximately 90% of major lenders.

The personal financial information that is available in Equifax credit reports serves as the basis for the Beacon scores. The Beacon credit scoring model can be used in different ways to decide whether or not to give you a loan or credit line.

For instance, the Equifax Beacon 5.0 score, the Experian/Fair Isaac Risk Model V2SM, and the TransUnion FICO Risk Score Classic 04 are all utilized in Fannie Mae’s mortgage screening process. Equifax’s version of the FICO 8 credit score was first made available to consumers in 2009.

VantageScores are a component of a credit scoring model that was developed jointly by Equifax, Experian, and TransUnion. These scores are distinct from Beacon scores and FICO scores, which are also used.

How the Beacon Scores Are Calculated

Beacon credit scores are derived using Equifax’s secret scoring formula, which the company does not make public. But because both Beacon 5.0 and Beacon 09 are based on FICO’s methodology, the criteria that are used to tabulate ratings are the same for both versions.

The following is the formula used to determine your FICO credit score:

  • Your track record of making payments accounts for 35% of your total score.
  • To be reimbursed: 30% of your total score
  • 15 percent of your score is determined by how long you’ve had credit.
  • The new credit will account for 10% of your overall score.
  • The types of credit you use account for 10% of your overall score.

Keeping this in mind, the most effective strategies to raise your Beacon score (as well as your FICO score) are to pay your bills on time and to keep your credit utilization as low as possible. Keeping existing accounts open, utilizing a variety of credit types, and applying for new credit in moderation are all things that can help you improve your credit score.

As was previously stated, Fannie Mae conducts its mortgage underwriting using the Beacon 5.0 system. Beacon 09, which is derived from FICO 08, has the potential to be utilized in a variety of different kinds of loan choices. If you apply for a credit card or a vehicle loan, for instance, the lending institution might look at either your Beacon 09 score or your FICO 08 score. Again, the higher your scores are, the greater the likelihood that you will be authorized and the better the interest rates you will receive.

Creditors have the ability to choose which credit score model to apply when making approval decisions. It is not unheard of for mortgage lending institutions to use multiple credit scoring models, as is the case with the company in question. It is important to keep in mind that the information contained in your credit reports might cause your credit scores to vary from one credit bureau to another. This is determined by the data that is contained in your credit reports. When you check your own credit rating, it will not show up as a hard query on your credit report and it won’t cost you any points on your credit score.

In comparison to other credit scores, Beacon Scores are

Beacon scores, in general, can be applied as a form of risk assessment when it comes to the granting of credit or loans. This is also true for other sorts of credit ratings, such as different FICO scores and VantageScores variations. But credit scores might be different in how they measure risk and what factors they use in their calculations.

For example, with FICO 08, the focus is on predicting default rates and determining how likely it is that a consumer will pay back a loan or line of credit they have taken out. The Pinnacle score from Equifax is a so-called “next generation” model that evaluates and forecasts lending risk based on more than 80 different characteristics. Equifax also has a second scoring system that can tell how likely it is that a person will file for bankruptcy.

The FICO scoring methodology is comparable to another scoring model called VantageScores, which uses many of the same elements to determine a person’s score. However, the new version of VantageScore incorporates other data, such as rent and utility bills, which have not been taken into consideration by previous scoring models. The new version of VantageScore incorporates trend data, such as an individual’s payment history over a period of time.

What’s the takeaway here? Beacon credit scores are merely one of the many possible varieties of credit scores for individuals. Even though FICO scores are the most common, comparing your scores using a variety of models can give you a more accurate idea of how potential lenders see you.

Check your credit report often, and if you find any mistakes, you should dispute them so they can be fixed or removed.

Key Takeaways

  • Beacon credit scores are another name for variations of FICO credit scores that are offered by Equifax.
  • The majority of lenders use FICO credit scores to decide whether or not to give out credit.
  • You can help improve your credit scores by making on-time payments and keeping your credit card balances low in comparison to your available credit.
  • When determining whether or not to grant you a loan, lenders may look at your Beacon score in addition to the results of other credit scoring models.
  • The higher your credit score, the more probable it is that you will be approved for loans at interest rates that are favorable relative to other borrowers.

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