Credit Scoring

What is Credit Scoring Anyway?
Credit scoring is a quick, accurate and consistent scientific method for assessing credit risk. Your credit scores are based on data stored by a credit repository about your credit history and payment pattern.

Credit scores are calculated by statistical models that assign points to factors indicative of repayment. These scoring models exist in software utilized by credit bureaus or lenders. Credit scores are based on data rather than human judgement, making credit scoring an objective risk assessment tool as opposed to a subjective, possibly discriminatory, human interpretation of information.

Even the best underwriter cannot match scoring's statistical ability to weigh and measure hundreds of factors and reach a number indicating relative credit risk in a matter of seconds. The resulting score is a "snapshot." It sums up what your past payment performance and current usage of credit say about your level of credit risk to the lender.

Because the score is a composite of all the applicant's credit information, no single factor like a late payment or even a bankruptcy will be the sole cause of an unacceptable credit score. Credit scoring can be difficult to understand and explain to consumers. NAMB has produced the brochure, A Consumer's Guide to the Facts & Fiction About Credit Scoring and Its Role in Lending, to educate mortgage consumers about credit scoring. Ask your SCMBA/NAMB member mortgage broker for a copy today.