State By State Average Consumer Credit Scores, Ranking, and Ratings

Website: The Home Improvement Web

*State Credit Ranking is in descending order and some states ranking may be equal for the     data used.
*Information compiled 4th QTR 2004 and 2nd QTR 2006
*Red denotes a drop from 2004 to 2006

How Does Credit Scoring Affect Your Loan Application?

Credit scoring is used to help potential lenders quickly measure an applicant's credit worthiness and/or risk. The score is based on the information found on the applicants credit report and calculated using a statistical formula. The scoring system awards or deducts points for each factor that helps predict the individuals payment behavior. The sum of these point additions and subtractions calculates your credit score. Credit scores can range from 330 to 830 with a higher score indicating a lower credit risk and an overall picture of the individuals credit worthiness. Individuals with higher credit scores are generally offered more favorable loan rates and terms. Simply put, credit scoring is a method of assessing the credit risk of a loan applicant. It uses mathematical models to evaluate a person's credit worthiness and risk associated, based on their credit history, current debt and payment history.

In the early 1980s, the three major credit bureaus (Experian, Equifax and TransUnion) each developed scoring models that allowed them to offer a score based solely on the data of one individual. Creditors frequently use these scores when deciding to approve a loan applicant and at what rate. Creditors also consider other information, such as salary and employment history when making loan decisions. In general, a higher score indicates lower credit risk. Individuals with high credit scores, have a good chance of obtaining loans at the best interest rates available for the type of loan they are applying for.

Average scores indicate good credit, but could also point to potential problem areas in their credit history. With lower credit scores, individuals may find they can still obtain a loan. However, the process may be lengthier and more involved, as creditors consider scores below average to be an indicator of greater credit risk. One of the best ways to assure one's credit score is as high as possible is to make monthly payments on time - every time. In fact, a recent study shows with just one delinquent auto payment, the average individuals credit score dropped over 100 points.

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