Define Beacon (Pinnacle) Score

What Is a Pinnacle (Beacon) Score?

The Equifax Credit Bureau generates the Beacon Score, which has subsequently been renamed the Pinnacle Score, to give lenders information about an individual's creditworthiness. Beacon Scores are credit scores calculated using a complicated algorithm. These figures provide information to a lender about a borrower's credit history and likely capacity to repay the amount for which they are applying.

While the specific formula for calculating the Pinnacle score is a trade secret of Equifax, payment history and delinquent accounts are the most important factors, along with the length of credit history, types of accounts utilised, and credit queries.

TAKEAWAYS IMPORTANT

• Equifax created the Pinnacle score as a credit rating technique.

• Although the specific methodology is a carefully kept secret, factors like credit history, late payments, and the amount of active credit lines will all affect your score.

• A better credit score indicates that you are a good credit risk, but a low score may prevent you from getting credit or compel you to pay higher interest rates.

• Paying off delinquent accounts, maintaining a credit usage ratio of less than 30%, and decreasing the amount of queries on your credit report can all help you raise your Pinnacle score.

• Based on the original FICO scoring approach, each bureau has its own scoring methodology.

Getting to Know the Beacon (Pinnacle) Score

Equifax's Pinnacle Score is a credit scoring mechanism that it uses to generate a credit score for a lender when they conduct a hard inquiry.

Equifax, Transunion, and Experian, the three major credit agencies, each have their own methods for calculating a credit score. A credit score is a numerical figure that is used to measure a borrower's riskiness. It is normally between 300 and 850.

Lenders consider consumers with a better credit score to be less hazardous since they have a track record of repaying their debts on time. With a credit score of 700 or above, most lenders consider a borrower to have strong credit.

Bands of acceptability are used by lenders to qualify borrowers based on their credit score level. Many mainstream lenders, for example, will restrict loans to customers with credit scores below 700. Other factors on a borrower's credit record may be considered by lenders, but the credit score is usually the most important element.

The Beacon (Pinnacle) Score's History

The Fair, Isaac, and Company created the first FICO score in 1989 in order to standardise how credit ratings are generated. Previously, lenders would establish a score based on their own methods. This caused issues due to the broad variety of outcomes; a consumer's credit history may be favourable with one lender but terrible with another.

The desire for standardisation aided in the formation of the three credit agencies we know today: Equifax, Experian, and Transunion. Equifax uses the Pinnacle score, which is based on the scoring system employed by each agency.

What Can You Do to Raise Your Pinnacle Score?

Requesting your Equifax credit report is the first step in improving your credit score. This will guarantee that erroneous information, such as a debt you've previously paid off or don't recognise, has no impact on your Pinnacle score.

The next step is to get a handle on your bills and late payments once you've verified that all of the information on your credit report is accurate and up-to-date. Payment history and credit utilisation are the two most strongly weighted elements that influence your Pinnacle score.

The quantity of credit you are now using is referred to as credit consumption. You have a credit usage percentage of 70% if you have a credit card with a $1000 limit and have already spent $700 of that limit. Lenders think this to be excessively expensive. Your Pinnacle score will rise if you pay off your credit card and keep your debt-to-income ratio below 20-30%.

Paying off overdue bills is another approach to raise your Pinnacle score. If you can't afford to pay the whole amount, contact the lender or debt collection agency in charge of your debt and see if they'll take a reduced payment. If your lender won't accept anything less than the whole amount, come up with a payment plan that you can afford and won't put you behind on your other expenses.

Finally, restricting the amount of credit accounts you apply for is one approach to keep your Pinnacle score from plummeting any worse. A hard inquiry occurs when a lender requests your credit report from one or all of the three credit agencies when you apply for a new loan or credit card. Too many hard queries on your account will lower your score by signalling to lenders that you are in financial trouble.

How is the Beacon (Pinnacle) Score Determined?

When a lender does a hard credit inquiry to make a credit decision, each credit bureau has its own algorithms and different alternatives that a lender might request.

While the actual process used to construct the Pinnacle score is kept secret, late payments, existing debts, length of time an account has been open, categories of credit, and new credit applications are all criteria considered by practically all credit scoring systems. Depending on the sort of credit the borrower is looking for and their relationship with credit reporting agencies, lenders might require different forms of a credit score. Some lenders work with a single credit agency exclusively, while others compare credit ratings from the three major credit bureaus.

A lender's unique underwriting procedure includes the type of credit score analysis they do while reviewing a loan application. The parameters of the relationship will be governed by service agreements between lenders and credit reporting organisations, which will allocate prices for hard credit inquiry reports and other services.

Equifax Ratings

Equifax gives lenders multiple versions of its Pinnacle and Beacon scores depending on the type of loan a customer is seeking. Beacon 5.0 Base, Beacon 5.0 Auto, Beacon 5.0 Bank Card, Beacon 09 Base, Beacon 09 Auto, Beacon 09 Bank Card, Beacon 09 Mortgage, Pinnacle 1, and Pinnacle 2 are among the techniques available within these two categories.

When lenders engage with Equifax for credit score reporting, they have complete transparency into how each credit score is created and the variances across versions. Lenders can then request a specific form of credit score from Equifax based on the type of credit a borrower is applying for.

Frequently Asked Questions about Pinnacle Score

What Is the Difference Between FICO and Beacon (Pinnacle)?

Fair, Isaac and Company introduced the FICO score in 1989 as the first credit score in an effort to standardise how credit ratings are calculated. Equifax, on the other hand, developed the Beacon and Pinnacle scores as offshoots of the original FICO scoring process at a later period.

What Is a Beacon's Average Score?

While there is no publicly available information on the average Beacon or Pinnacle score, Experian estimates that the average FICO score in the United States in 2020 will be 711.

What Is the Purpose of Having Three Credit Agencies?

Before the initial FICO scoring technique was launched in 1989, lenders would analyse individuals' credit using their own approach, resulting in significant differences. Standardization aided in the formation of the three credit agencies we know today: Equifax, Experian, and Transunion. This helps standardise credit scores since lenders often take a borrower's information from one or all three agencies, eliminating the need for them to develop their own methodology.