| |
| |
|
Credit Information |
|
|
|
Like It Or Not, You Have A Score To Settle! Part 1
Just when most people finish with school and can stop worrying about test scores, there's a new kind of scoring that enters the picture. It's called credit scoring. And, its impact on your financial future can mean more to you than a college degree. Why It's So Important: Ever wonder how a creditor decides whether to grant you credit? For years, creditors have been using credit scoring systems to determine if you'd be a good risk for credit cards and auto loans. More recently, scoring has been used to help creditors evaluate your ability to repay home mortgage loans. Precisely what is credit scoring? Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and age of your accounts is collected from credit applications and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A scoring system awards points for each factor that helps predict who is most likely to repay a debt. Total number of points helps predict how creditworthy you are; how likely it is that you will repay a loan and make payments when due. Why is credit scoring used? Credit scoring is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applications objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals. To develop a model, a creditor selects a random sample of its customers (or a sample of similar customers if their sample is not large enough), and analyzes it statistically to identify characteristics that relate to creditworthiness. Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk. Each creditor may use its own scoring model, different scoring models for different types of credit, or a generic model developed by a credit scoring company. How reliable is the credit scoring system? Credit scoring systems enable creditors to evaluate millions of applicants consistently and impartially on many different characteristics. But to be statistically valid, scoring systems must be based on a big enough sample. Remember that these systems generally very from creditor to creditor. Although you may think such a system is arbitrary or impersonal, it can help make decisions faster, more accurately, and more impartially than individuals when it is properly designed. In fact, many creditors design their systems so that, in marginal cases, applicants whose scores are not high enough to pass easily, or are low enough to fail absolutely are referred to a credit manager who decides whether the company or lender will extend credit. This may allow for discussion and negotiation between the credit manager and the consumer. What happens if you are denied credit or don't get the terms you want? For the answer to that crucial question and how to improve your credit score, be sure to read Part II of "Like It Or Not, You Have A Score To Settle." at Credit And You.com Copyright © Credit and You | All Rights Reserved Credit and You.com are a group of credit expert, who have created a free credit information website for consumers. Feel free to pass this article along to family and friends. http://www.creditandyou.com/creditscoreexplained.html
MORE RESOURCES:
Credit - Google News |
|
|
|
RELATED ARTICLES
Your Guide On Choosing a Credit Card To Suit You Reach into your wallet or purse, pull out a card, swipe, and you're done. It is very easy to use a credit card. Choosing the Right Credit Counseling Agency for You - Some Tips Part 2 Credit counseling companies come in all shapes and sizes. Whether you are looking at working with a local credit counseling organization or a national credit counseling organization there are some very important factors to calculate before choosing the right credit counseling option for you. Rate Tarts Losing Ability to Cherry Pick A "rate tart" is someone who switches from one zero per cent introductory credit card deal to another to avoid paying interest; however they may be set to become something of the past. Recently a number of the major credit card companies, including Egg, Barclays, the Royal Bank of Scotland and MBNA have introduced transfer charges for people who want to shift their outstanding credit card balances to a new card to take advantage of a zero per cent introductory rate. What Are The Most Common Credit Card Mistakes? Now in a world with so many easy to get credit cards it can be easy for someone who is a first time credit card holder, or even someone who has several credit cards in the past to make mistakes when using the card.One of the most common mistakes when using credit cards is to use the credit card to make purchases of things you are not really able to afford. 14 Common Credit Mistakes Establishing credit and wisely managing your credit becomes easier when you know how. You'll feel empowered by taking knowledgeable steps towards good credit, and you'll be on your way to purchasing real estate and greater financial freedom. First Major Regulatory and Legislative Victory of 2005 for Creditors and Consumers Under the Fair Debt Collection Practices Act, collectors are not allowed to disclose a consumers past due debt to anyone other than the debtor and in some cases a spouse. The Telephone Consumer Protection Act would have required collectors to identify the registered name of their business in any pre-recorded messages to consumers or debtors. Credit Report - Check Yours Regularly - and for Free In the twenty-first century, there are few documents that have a greater impact on the lives of Americans then their credit report. Credit rating determines one's ability to buy a home, a car, or to obtain a credit card or a job. ChexSystems: Alternative Options for People Whove Been Checking Accounts Individual banks elect to become members of ChexSystems, and to use their services.Those individual banks are the ones who decides what is sufficient cause to close your account and report you to ChexSystems. Are 0% Credit Cards Reaching Their End? Are Credit Card companies starting to feel the pinch? We all know that the Credit Card companies make their money by charging us interest on the money we borrow. With all the 0% balance transfer offers that we have seen over the last few years its no wonder these companies are concerned they aren't making any money. Warning: Todays Non Profit Credit Counselors Are Yesterdays Bill Collectors! Here's a dirty secret, today's "non profit credit counselors" are often just front organizations paid lucrative commissions by creditors to keep consumers from declaring bankruptcy!In the "debt collection biz", creditors will sell your outstanding debt along with the debt of hundreds of others to a collection agency for cash up front.The collection agencies will work this debt until they've made all the money they can. Credit Cards for Home Business It is wise for you to have a company credit card like a VISA card. How can you find the least expensive bank card for your business? You may decide to use a VISA card from your local bank. Update Your Computer System With Bad Credit Computer Financing The moment I placed myself in front of the computer screen a whole new world beckoned me to join it. And years of strolling have proved incompetent to get me acquainted with the full panorama of computers. Fun with Credit Cards For those of us who know how to use them properly, credit cards can actually be quite fun and lucrative. To those who do not know how to use them properly, I would say that you should stop reading this column right about now, or at least I would advise you not to try any of this stuff at home. All About Balance Transfers What is a balance transfer?A balance transfer can be explained simply as a balance transfer! When a balance is transferred usually from a credit card, but possible from a bank account or loan to a credit card with a offer interest rate (usually 0%) for a set period. It does not have to be the entire amount. Addressing Bad Credit Card Debt Spending HabitsSo you've just got your credit card. The first thing you need to be wary about is that a credit card is very easy to use - afterall you can shop in stores, via catalogs and online with your credit card. Credit Report - How to Improve Your Credit Score One of the great mysteries of life is how the three major credit bureaus (Experian, Equifax, and Trans Union) score credit. They all have secret statistical formulas for determining your credit score, but they are unwilling to divulge exactly what, exactly, constitutes your score. How To Eliminate Credit Card Debt There is almost nothing more troublesome than having too much debt to pay each month. Consumers incur debt for many different reasons. Tips For Getting Your First Credit Card Most of us get a credit card on our name when we go to college or when we are in our senior years of high school and all of us stumble into the same types of difficulties when it comes to finding an issuer and managing the credit card. Most banks ask for a prior type of credit history that most of the time lacks and for some type of warranty that we will be good payers. How Your Credit History Can Affect Your Life Your credit history is an important aspect of your life. Maintaining your credit rating is very important to your future and to your lifestyle. Identity Theft - Guard Your Childrens Social Security Numbers Identity theft is a growing concern among Americans, and rates among the top five complaints received by states' Attorney General's offices. A stolen identity can lead to tens of thousands of dollars worth of debt in the victim's name and it can take years to completely undo the damage done to the victim's credit report.
|
|
Home | Site Map | |
| © 2007 |
