Beacon scores were the name that Equifax used when it issued credit scores using the older Fair Isaac Corporation scoring algorithm. However, when the scoring model was changed to generate NextGen FICO Scores, Equifax began to call its scores Pinnacle scores. Pinnacle scores are calculated the same way FICO scores are.
What is a Good Score?
Scores range from 300 to 850, with the highest scores being the best. About 13 percent of the population has a credit score of 800 or more, while about 14 percent have a credit score below 600. The median score is in the low 700s.
How Scores are Viewed by Lenders
The most common use for Pinnacle scores is for lenders to determine whether or not to offer a loan. If your Pinnacle score is below 500, it will be virtually impossible to get a loan. Even those with scores below 600 will have difficulty getting a loan. The best interest rates will be given for people who have scores above 760, according to Bankrate.com.
Factors for the Pinnacle Score
The Pinnacle score uses information found in your credit report to calculate your credit score. The exact formula is not revealed but there are five factors that make up the score. The first factor, payment history, makes up 35 percent of this score. This section takes into account how well you've paid your debts and whether or not you have defaulted on any money you owe. The second factor, your balances owed, accounts for 30 percent of your score. This looks at how much money you owe and how much of your credit lines you are using. The third factor, the length of your credit history, determines 15 percent of your credit score. The fourth factor, your mix of credit, looks at the different types of credit you've used and makes up 10 percent of your score. The fifth component, how much credit you've recently applied for, also accounts for 10 percent of your score.
Ways to Improve Your Score
The best way to improve your credit score is to pay all of your debts on time since your payment history accounts for 35 percent of your score. If you can't pay your creditors as you have agreed, contact them to ask for an adjustment to your payment schedule. Most creditors will work with you within reason because if they have to use a collection agency they will have to pay a fee and they will lose more money than if they make a small adjustment to your payment schedule. As soon as you are able, get all of your accounts current, even if that means you make only the minimum payment on each one.
If you find that there are errors in your credit report, write a letter to the credit bureau explaining the error. Make a copy of your credit report and circle any information you believe is incorrect and include copies of any documentation you have to support your claim. Credit bureaus must start an investigation of your claim within 30 days of receiving it so you will usually know within two months whether your claim has been upheld or denied.