A beacon score is a type of credit score used by Equifax, one of the major credit bureaus. The original beacon score has largely been replaced by next generation scoring, but the term is still in use in some regions. The higher the score, the more creditworthy a consumer is, with high scores indicating a high probability that any loans taken out will be repaid, most probably in a timely fashion. Lower scores suggest that a person is a credit risk who may not repay a loan.
An algorithm developed by the Fair Isaac Corporation, known as FICO, is used to calculate beacon scores. The algorithm considers a consumer's history, total credit utilization, and other factors to generate a numerical score. Credit scores do not reflect ability to pay as much as they indicate whether or not a consumer will be likely to repay a loan. Some people are fully capable of taking on a loan in terms of meeting income requirements, but have poor credit scores suggesting that they may not be inclined to repay the loan, which would make them a credit risk.
The beacon score is used internally. It is available to creditors, including companies that a person may apply to for loans and other forms of financial assistance. People are not entitled to see their scores, although they can access estimated scores. Many banks and other financial institutions offer credit score monitoring on their accounts and this may include estimates of current credit scores along with tips on improving them.
A beacon score can fall between 300 and 850. Anyone with a score higher than 750 is said to have very good credit, and is an excellent candidate for a loan. Scores between 700 and 750 are good, while scores between 650 and 700 are “average.” Lower scores can indicate that someone is not creditworthy. People with these scores may not be eligible for certain types of credit and may pay high interest on credit they can access.
While the same model for credit scoring is used by different credit bureaus, it is still possible for scores to vary. Sometimes the information on file is variable. Thus, a beacon score may be higher or or lower than scores provided by other agencies. It is advisable to review credit reports for all credit agencies periodically in order to check for disparities between reports, looking especially closely for signs of financial activity that may be fraudulent.
