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Understanding How Credit Scoring Models Work

Credit scoring is a system used by lenders to help determine a consumer’s creditworthiness, the terms they will be offered and the rate they will be charged for the loan. There are over 100 different credit scoring models, each one using a different formula to review your credit history and calculate a 3-digit score.1 While consumers don’t get to choose which credit scoring model a lender uses, it can be helpful to understand how the system works.

The most familiar credit scoring model is the FICO® Score, which is used by many lenders to determine if a borrower will fulfill their financial obligations. FICO® Scores are calculated from the following five categories.2

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