How Credit Scores are Calculated

     The following information on credit scores was published and provided by on August 21, 2003.

     Designers of credit scoring models review a set of consumers - often over a million - who opened loans at the same time, and determine who paid their loan and who did not. The credit profiles of the consumers who defaulted on the loans are examined to identify common variables they exhibited at the time they applied for the loan. The designers then build statistical models that assign weights to each variable, and these variables are combined to create a score.

     Models for specific types of loans, such as auto or home, more closely consider consumer payment statistics related to these loans. Model builders strive to identify the best set of variables from a consumer's past credit history that most effectively predict future credit behavior. (, 8/21/03)

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