Understanding The Credit Score: Meaning, Importance and Implications

Introduction

There is a new credit score that is vastly different than the traditional financial credit score. If you have not heard about it, you will want to read this. In today's professional landscape, numerous challenges persist that contribute to perceptions of unfairness. Employers often appear biased, whether based on race, religion, gender, or other factors. While these issues are not to be understated, we propose a solution that separates personal attributes from professional capabilities. In business, especially for smaller enterprises, what truly matters is the value an individual brings to the organization. Their work ethic, ability to perform tasks, and their moral integrity are crucial—essentially, can they be relied upon. From a hiring manager's perspective, there is often insufficient evidence to confidently answer these questions. The traditional hiring process lacks a reliable method to accurately evaluate candidates, leading to failures in hiring real talent. This longstanding issue now has a viable solution.

The KnocScore, short for Knowledge Credibility Score, pronounced “Knock”, (though technically correct, "know-ck" is awkward). Just as a traditional credit score provides insights into an individual's financial reliability, the KnocScore offers a dependable measure of a person's knowledge. The FICO Score, representing the Fair Isaac Corp, is synonymous with a fair credit scoring system that abstracts personal financial capability and history from data that is irrelevant. Similarly, the KnocScore eliminates unnecessary biases, offering business leaders a factual basis for decision-making. Much like credit scoring depends on credit reports to gauge creditworthiness, the KnocScore uses extensive data to evaluate knowledge credibility. In the financial world, reviewing credit reports is essential to underwrite loans with confidence. Similarly, the KnocScore provides employers the ability to hire with confidence.

To learn more about the hiring managers perspective, read Improving hiring quality in 2024 is more than just finding candidates with good resume’s.

Understanding credit and credit score history

In the modern era, our economies are far larger, and grow much faster than in all of the history of man. The ability to start a business, create a family, buy a home for them, and buy a car would not exist for most individuals, without loans. To understand how credit scores work, its important to understand why they were created, and credit score history.

The modern credit system has come a long ways from debts' early beginning. To give some context, debt has a long history and has been around since before the days of the ancient Greeks and even before there were was money and coin. There are recordings about debt that date back to the 4th millennium BCE from Mesopotamia. Debt could be used to buy land, buy tools and farm animals, and even grain to relieve a food crises. Not shockingly, there is recorded history about enslavement related to the repayment of debt. The indebted, likely a citizen, including their families and their slaves would be used to repay a loan. Even cities or polis's might be captured and enslaved to repay debts related to food and grain. Thus, to receive a loan, one would have to have something to trade and this would likely have only been a male head of household.

Enslaving ones family members, in modern society, to repay a debt wouldn't be popular to say the least. But it gives us some scope about the gravity of debt and the difficulty to obtain it. Eventually, mechanisms for loans allowed merchants to obtain business loans to buy land, ships, or goods.

So far, we've discussed the borrows problems. Consider now that its your hard earned money that is being loaned out. It would certainly be risky to give a loan to everyone that asked for it. Consider further, that if you only have one pot of money, your likely to loan it to those that will both repay you, and repay you at the best rates. Loaning money to the wrong ventures results in running out of money and out of business. If many large lending institutions have this problem at the same time this leads to large problems. Lending is an important part of economies and without it can lead to famine and other large structural failures. Risk cannot be understated.

To protect themselves from consequences of bad loans, lenders turned to a commercial credit reporting policies. These evaluated the creditworthiness of potential business customers. Decisions were heavily subjective and trust could not be easily given. To build trust, a good business customer had to rely on his networks of personal relationships. The lender would often consider factors such as a borrower's reputation, earnings and repayment history, and personal references to understand the borrowers credit worthiness. This system made it difficult to borrow money for the ordinary individuals, even if they had means to repay it. A better system evolved that helped to scale economies and encouraged larger and faster production.

In 1845 began the beginning of the credit bureaus. In the 1960's, these grew to over 2,000 in the US. Today, there remains only three, Equifax, TransUnion, and Experian. During the late 1950s, banks started using computerized credit scoring to redefine creditworthiness as abstract statistical risk. In 1974, the Equal Credit Opportunity Act made it illegal to deny credit based on gender or marital status. and in 1976 furthered opportunity by continuing to make it illegal to make loans based on race, nationality, religion, age, and even receipt of public assistance. To protect themselves against the risk of bad loans and lawsuits, the credit industry accelerated the use of credit scoring.

During the 1970s and 80s, the credit reporting industry relentlessly consolidated and moved aggressively into prescreening. The FICO score became popular in 1995 due to Freddie Mac that told lenders to use credit scoring for all new mortgage applications. FICO began as Fair, Isaacs and Company in 1956. They were a tech company that sold credit scoring model algorithms.

The two main credit scoring systems, FICO and VantageScore by TransUnion, use historical financial data to assess an individual's creditworthiness. Building a robust credit history can be challenging, especially for those not from affluent backgrounds, as lenders often lack a basis for evaluating the risk associated with lending to them. These scoring systems do not effectively predict an individual's earning potential, making it difficult for young individuals to secure essential loans needed to thrive in today's financial landscape. This is one area where the KnocScore, the new credit score shines. KnocScore was invented as an abstract statistical rating system for knowledge credibility. It includes variables to comprehend earning potential, and hints of character.

Now that we've given some history and context to credit, at least from the financial industries perspective, lets compare and contrast the difference between the old credit scores, and the new KnocScore.

What is a credit score?

The credit score for knowledge is a numerical representation of an individual’s or business’s knowledge expertise. This is different from the credit bureaus definition of a credit score, thus it's important to note the credit industries definitions. As mentioned previously, there are three major credit bureaus in the US: Equifax, Experian, and TransUnion. There is also the FICO company. Each has a similar definition: "A credit score is a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time." - Equifax. Traditional credit scores narrowly focus on financial history. Credit scores for knowledge is a broader approach that deals with knowledge credibilty. The KnocScore incorporates additional information from many different variables

including non-traditional data sources never used before. While the traditional credit score helps lenders, creditors, and other organizations assess the potential risk of lending or extending credit. The KnocScore helps hiring managers hire real talent, individuals with real talent - get better opportunities, and business professionals gain the ability to speed through cold introductions. Just as a good credit score can open doors to better financial opportunities, a strong KnocScore will open doors to better financial and work opportunities.

What is a good financial credit score?

To the financial credit industry, a good credit score is a crucial financial metric that reflects an individual's creditworthiness, typically ranging from 670 and up on the FICO score scale. This score range indicates to lenders, credit card issuers, and financial institutions that the individual has a reliable credit history and is likely to repay debts on time. Achieving a good credit score not only opens doors to more favorable loan terms and a lower interest rate but also enhances one's ability to secure higher credit limits and better credit card offers. Credit scores also impact non-lending decisions like

rental applications. Maintaining a good credit score involves consistent on-time payments, managing credit utilization, and maintaining a healthy mix of credit accounts. Regularly reviewing your credit report from the three major credit bureaus—Equifax, Experian, and TransUnion—can help identify areas for improvement and ensure accuracy, ultimately supporting financial stability and opportunities.

What is a good knowledge credit score?

The credit score for knowledge differs from its financial world counterpart. Where the FICO score and Vangaurd

score have a ceiling of 850, the KnocScore's ceiling is set by the individuals within a domain of knowledge. Each individual is compared within that domain to the other users to provide a simple comparison to the highest individual. It indicates where the assessed individual stands in the range from others. A good credit score for knowledge will depend on the firm or professional as an observer. Each will set their own standards based on normal economic principles. Individuals with higher scores in higher demand skill sets will be more competitive. Many firms will not need the most competitive individuals. Thus, talent that sits in the adequate range will be good enough. An individual that ranks higher may be better at projects that demand more creativity and inventiveness, where a routine job that requires an industry normal level of knowledge would be better for average jobs.

Financial credit score ranges

Credit scores are categorized into different ranges, each representing a different level of creditworthiness. Here are the most common credit score ranges:

1. Excellent credit: 750-850
2. Good credit: 700-749
3. Fair credit: 650-699
4. Poor credit: 600-649
5. Bad credit: Below 600

It’s worth noting that different lenders may have different criteria for what constitutes a good credit score. However, in general, a higher credit score is always better. The range above may not be the same for all lending institutions. Many consider a score of 800 or above as excellent. While FICO defines a good credit score as being between 670 and 739. VantageScore defines a good score as ranging from 661 to 780. Still, most lenders consider a FICO score of 670 or higher to be a good score. Finally, scores from 580 to 669 are generally considered fair. In this range it is still possible to get a loan but it will be with higher interest rates.

Improving your credit score

In the financial world, the availability of a free credit score is a valuable tool for consumers to monitor and understand their credit health. However, consumers only get one free credit report a year unless they pay a fee. Throughout its history, the financial industry has maintained an opaque set of rules. In contrast, the credit score for knowledge benefits from user trust. The system is transparent giving it part of its objective property. It allows its users to continually monitor their score from the convenience of their own devices so they can see how they are performing. By its being transparent, all individuals can make their own decisions based on sound information. Individuals can query how to improve their scores, and see what skills and scores other individuals have that work at other companies. Although each individuals information is private, unless publicly shared, generic profiles can be available.

How to raise your financial credit score?

Raising your credit score requires a combination of financial discipline and smart credit management strategies. Here are some tips to help you improve your financial credit score:

1. Pay your bills on time: Paying bills on time has the largest impact on a credit score. Payment history accounts for 35% of your credit score, so making timely payments is crucial. Using a credit card for small purchases and paying it off monthly helps maintain account activity.
2. Keep credit utilization low: Keep your credit utilization ratio below 30% to show lenders you can manage your debt responsibly.
3. Monitor your credit report: Check your credit report regularly to ensure it’s accurate and up-to-date.
4. Avoid new credit inquiries: Applying for too many credit cards or loans can negatively affect your credit score.
5. Don't close old accounts: Closing older credit accounts can lower your credit score.
6. Consider a secured credit card: If you’re struggling to get approved for a regular credit card, consider a secured credit card to start building credit.

7. Get a vehicle loan you can afford: Getting a loan for a vehicle and making timely payments will improve your credit score by demonstrating your capability to make timely payments. This creates a credit history the industry can see. It says that a company with a reputation has placed trust in you. Taking out a loan and reliably making monthly payments has shown to improve credit scores dramatically. And this makes since, the credit industry doesn't make money, if they don't make loans.

How to raise your Knowledge Credit Score?

Raising your knowledge credit score takes more focus on the fundamentals of knowledge, how you demonstrate knowledge, and who you interact with using knowledge.

1. Continue learning advanced or college-level courses from professors, or individuals who are well respected in the field you are learning.
• Ensure these courses provide value to industry and teach the skills and or theory that industry requires.
• Study the course materials and use the materials in practice.
• Create study materials and allow others to use them and learn from them. Although this may seem controversial in some academic settings, industry cares more that you've learned the materials and that you are efficient.
• Focus on building core skills needed for industry, but do not neglect the non-core skill classes such as history, the ability to write, mathematics and science. Well rounded individuals who are deep in a skill that is in demand are valuable to industry.
2. Practice, or rather work in the skill sets that you desire to work in. Experience is highly sought after. This is demonstrating your capability.
3. Show progress in the difficulty of domains of knowledge that are areas where you want to work. Showing that you have experience in a domain of knowledge is necessary, but not progressing in a domain is stagnation. This is a judgement call since there is a good enough level for most jobs. The higher paying positions will likely want to see higher scores. Progressing in difficulty within a domain will result in a higher score within that domain of knowledge.
4. Create and share your knowledge in some form. This can be through teaching, or even blogging. Getting acknowledgement from others such as through citations or recommendations is a sign of expertise that will also help your scores.
5. The Knowledge Credit Score also includes information that give hints of character. Indicators of an individuals determination can be seen in athleticism. Demonstrating that an individual will work to improve themselves and push their boundaries are good qualities of character. An individual may not win an event, but they may be the most determined to improve themselves. That means a lot.
6. Additionally the Knowledge Credit Score also looks at acts of selflessness, and bravery. These are uncommon traits but are very valuable in leadership and in industry. Military awards are an excellent way to earn credit in these areas. Although one shouldn't seek strictly to be valorous since there is often an expensive and non-refundable cost.

Setting credit score standards

Industry specific credit scores like the credit card industry sets their own standards for what constitutes a good credit score. This affects approval rates and interest rates that they give to their users. They often use a credit report to apply their standards for their problems. Similarly, the KnocScore allows the user who views another individuals KnocScore to see its composition and why the score is what it is. Essentially it provides a credit report as well. In this way, the observer can make their own decisions based on their own criteria.

KnocScore is a fair credit scoring assessment because it has no opinion.

People should not get a job because of the color of their skin, their nationality, race, nor sex. Despite what people say, these biases creep into our decisions. Serious business owners need a way to abstract such bias, similar to how credit bureaus like Equifax, Experian, and TransUnion collect and analyze consumer credit information. These major credit bureaus play a crucial role in calculating FICO scores by gathering and evaluating consumer credit data to determine creditworthiness. We, industry, need people who can do

what we hire them to do. People with excellent work values. People who are smart and willing to find solutions to the tough questions. When hiring decisions are abstracted, employees believe the decision are fair. If an employee receives a position or promotion through a questionable decision, it undermines opinions self and value. This also impacts motivation to work both by the one who was promoted and by others. Like the winner of a marathon race. There is no opinion. The winner is the one who crosses the finish line first. Similarly, KnocScore is a fair assessment because it can have no opinion. The results are unquestionable. An individual earns their score. Full Stop! Just as FICO and VantageScore exclude certain types of information when calculating credit scores, KnocScore ensures a fair and unbiased evaluation.

A credit score is earned, not given

Financial credit scores are not simply handed out; they are built over time through responsible financial behavior and management. Like earning a reputation, a good credit score is achieved by consistently demonstrating reliability in financial matters. This includes making timely payments, managing available credit wisely, and maintaining a healthy credit mix. Just as a marathon runner earns their place through consistent training and

discipline, individuals earn their credit scores by adhering to sound financial practices. Credit scores are a reflection of one's past financial actions and decisions, serving as a testament to their creditworthiness. Similarly, the KnocScore, which measures knowledge credibility, is earned through demonstrated expertise and contributions within a specific domain. Both systems emphasize the importance of consistent effort and responsibility in achieving a favorable score.

Economic principals are key concepts to the KnocScore. Firstly, there is a cost through a scarce resource. This can be through a measurement of the exchange of money or through a cost to someone’s actual reputation. Conversely, systems that offer badges with no measurement, nor clarity to how it was earned are no more meaningful than a like on Facebook. Although there is meaning in a vote. The voter did not lose credibility, nor did it cost anything for them to click the mouse. To earn a KnocScore there is a cost in some form, similar to managing a credit limit, making points scarce. Secondly is the idea of demand. For one individual to give up a scarce resource, there must be a reason to do so. This creates pressure, or demand, for the knowledge that an individual has earned. The exchange of the scarce resource is proof of its’ value. Although these are not the only metrics involved, they are key.

Higher credit scores provides higher opportunity.

Credit scores play a significant role in determining financial opportunities and are influenced by various factors. A borrower's credit score plays a critical role in influencing the interest rates and payment options available, highlighting that better credit scores can lead to better financial opportunities. The KnocScore has a similar effect. The higher a KnocScore is within a domain of knowledge, the more valuable the individual is to industry. The KnocScore represents their credibility. Their credibility has value because it is earned. Not only is an individual with a higher KnocScore more likely to be more productive, their credibility can be shared. Sharing credibility can improve others credibility as well. Employers and other entities benefit from high scoring employees since this also improves their knowledge credibility score. The opposite is also true. Thus similar to the credit industry, individuals with high KnocScores will have greater opportunities because of their knowledge credibility.

Factors affecting credit scores

In the financial sector, credit scores are influenced by a variety of factors, each playing a crucial role in determining the overall score. Individuals should check their credit reports before and after getting a new loan.

1. Payment History: As mentioned above, consistently making on-time payments is crucial for boosting your credit score. Timely payments demonstrate reliability and financial responsibility. Conversely, late payments can have a detrimental effect, signaling potential risk to lenders and decreasing your score. It's essential to monitor your payment history closely, as this factor carries considerable weight in traditional credit scores.
2. Credit Utilization: Maintaining a low credit utilization rate is important to your credit score. This involves using only a small portion of your available credit limit, indicating prudent credit management. High credit utilization will negatively impact your score, suggesting financial over extension. Regularly reviewing your accounts and ensuring your credit card balances are kept in check can help maintain a favorable credit rate.
3. Credit History: Payment history is the most significant factor affecting credit scores. A long and positive credit history, with minimal negative marks, will enhance your

credit score. This history reflects your ability to manage credit over time, providing a track record of your financial behavior. The average age of your credit accounts and the duration of your credit relationships play a role in this factor. Thus keeping older accounts open can help improve the average age of your credit accounts.

4. Credit Mix: A diverse mix of credit types, such as credit cards, loans, and mortgages, will positively influence your credit score. This diversity demonstrates your ability to handle various credit forms effectively. Having a balanced credit mix shows lenders and evaluators that you can manage different types of credit responsibly, which is a favorable indicator in credit scoring models.
5. New Credit: Applying for too much new credit in a short period can lower your credit score. Each application for new credit results in a hard inquiry on your credit report, which will temporarily decrease your score. It's important to be strategic about new credit applications, as frequent inquiries may signal financial instability to lenders. Careful management of new credit is essential to maintaining a healthy score.

In the knowledge credit industry, there are far more variables that influence the knowledge credibility score. More will be posted on this later, as the platform becomes

open to public use, but there can be many factors that indicate an individual has knowledge in a domain. This is a complex issue and deals with questions like: what is knowledge? The difference between knowing of something? and knowing how something is accomplished? There is also a difference between memorizing the steps to complete a task, and understanding the why those steps achieve the desired outcome. One can memorize a mathematical formula without understanding why the numbers behave the way they do or the why the formula is important. As mentioned previously, in the domain of credibility, the KnocScore uses variables that indicate the content of an individuals character. Information that helps to understand determination, valor, and the "sticks-with-it-ness" such as athletic excellence, a hard to earn recognition tab from the military, and awards such as a bronze star with a 'V' for valor. The following is what the platform has released as far as information that is used for the score. We can already see that it provides a more complete picture than an academic institutions credential, and is vastly different from the financial industries credit score.

• Academic activity:
• Professional Experience:
• Athletic excellence:
• Military achievements and awards for valor:

Understanding credit reports

A credit report is a detailed document that contains information about an individual’s credit history. It abstracts non-relevant information such as race, religion, or gender. It’s used by lenders to evaluate creditworthiness and determine the likelihood of repaying a loan. Here are some key components of a credit report:

• Credit accounts: A list of all credit accounts, including credit cards, loans, and mortgages.
• Payment history: A record of all payments made on credit accounts, including late payments and collections.
• Credit inquiries: A list of all credit inquiries made in the past two years.
• Public records: Information about bankruptcies, foreclosures, and tax liens.

Similarly, the KnocScore also provides a credit report. This report provides an understanding as to what makes up the score. Details such as work history, projects, and relationships with projects. The amount of effort provided to the project in time and substance. And even the monetary value that the project brings to that company. Knowledge that is created by the individual and acknowledgements from others in the form of citations.

Social media likes are also factored in, although they are a weak validation, they are meaningful to some industries. This data can be viewed in the report, although it is only viewable if the individual has opted to make it available.

Types of Credit Scores

There are several types of credit scores, each with its own unique characteristics. Here are some of the most common types of credit scores:

• FICO scores: The most widely used credit score, FICO scores range from 300 to 850.
• VantageScores: Developed by the three major credit bureaus, VantageScores range from 501 to 990.
• Credit card issuer scores: Some credit card issuers use their own proprietary credit scores to evaluate creditworthiness.
• Mortgage credit scores: Specialized credit scores used by mortgage lenders to evaluate creditworthiness for mortgage loans.

It's essential to understand the different types of credit scores and how they’re used by lenders to make informed decisions about your credit.

Credibility Scores vs. Credit Scores

While credibility scores and credit scores share similarities, they are vastly different. The common perception of a Credit Score is the Financial industries version. Credit isn't just about finances however. Credit and credibility are inextricably connected particularly in the context of litigation where a witness has credit or credibility based on factors that are not directly controllable. Credit in the context of the financial industry are derived primarily from credit history and are used by lenders to evaluate an individual’s loanworthiness. They focus on factors like payment history, credit utilization, and length of credit history.

Credibility scores, on the other hand, encompass a wider range of data that translates to believability. The knocScore's knowledge credibility score could and should be used by the financial industry as evidence of an individuals ability to create revenue, but in the credit or loan industries context, knowledge credibility is not about an individuals history of repaying loans. Credit in this context is the credit an individual receives from their believability to have knowledge or ability to do work in a domain of knowledge.

In its strict definition of credit and credibility from the Merriam-Webster dictionary. An individual cannot have credit without having credibility. The two words can mean the same within the context of believability.

The KnocScore is a ‘Gold Standard' for knowledge credibility

The term ‘Gold Standard’ is defined in The Britannica Dictionary as “something that is considered to be the best and that is used to judge the quality or level of other, similar things.” The KnocScore embodies these attributes by providing a system that is consistent, transparent, self-correcting, and concrete. Its scores are derived in a manner that ensures they are unchangeable, resistant to manipulation, and free from bias and error. The KnocScore stands up to academic and industry scrutiny, surpassing other methods for measuring an individual’s or entity’s knowledge credibility and creditworthiness. This allows for an apples-to-apples comparison of individuals from diverse backgrounds or universities.

Conclusion

KnocScore is a cutting-edge credibility scoring system that leverages many data sources, and modern software paradigms to evaluate an individual’s or business’s credibility. Unlike traditional credit scores, which rely solely on credit history, KnocScore takes into account a wide array of factors. These include learning history, social media activity, online behavior, and other non-traditional data sources.

The result is an objective numerical score that provides a comprehensive picture of an individual’s or business’s credibility. By offering a more detailed and nuanced evaluation than traditional credit scores, KnocScore helps organizations make informed decisions based on a broader set of data points. This innovative approach ensures that the scoring is assessed fairly and accurately.

With the finance and loan industry, possessing a good credit score will unlock better financial opportunities and favorable loan conditions. For example, a minimum credit score is often necessary to qualify for loans, such as a score of 620 for conventional mortgages, which is essential for securing advantageous lending decisions and helps to determine if a lower interest rate can be give.

Possessing a good KnocScore unlocks better work and job related opportunities which can also lead to favorable economic opportunities such as higher pay and better benefits.

Ready to Build Your KnocScore?

As the KnocScore gains popularity, it’s poised to become a powerful asset for job seekers, recruiters, and professionals eager to stand out in today’s competitive market. By understanding and improving your KnocScore, you’re setting yourself up for a future where opportunities are based on skill and knowledge—just as financial credit scores paved the way for fairness in lending.

In today’s world, credibility is currency, and with KnocScore, professionals finally have a score to prove it.