New Concepts In Credit Scoring
John Simpson
Did you ever think that applying for a car loan would require scoring well on a test that you've been taking for years but never really studied for? Scores are how creditors determine your creditworthiness and the likelihood that they are going to give you a loan.
Credit scoring was first developed in the 1950s, but over the last couple of decades, it has become more sophisticated and a crucial part of seeing whether giving you money is worth the risk.
All three major credit agencies (Experian, Equifax and Trans Union) worked to develop a generic scoring system based solely on the information reported to them about an individual. Credit scoring is a scientific method that uses statistical models to assess an individual's credit worthiness based on their credit history and current credit accounts.
When you apply for a mortgage, a car loan, a student loan, and a credit card or in some cases even employment, the offering company can order a copy of your credit report.
While each credit agency has a common value system for their scores, how they tabulate the scores is individual to each company based on the data in their system. It's also worth noting that all three are not uniform in how much information is reported to them or requested from them.
While all three are accessible, information for a particular creditor may only be reported to one of the agencies. So if Equifax has a positive report from Company A, you might not find that same report at Experian or Trans Union.
So when a score is requested, a computer compiles it by using information from an individual's credit report, such as how much money is owed and whether payments have been made on time.
Then that score is compared to the credit performance of others with similar profiles. The system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points per credit score helps predict how likely it is that you will repay a loan and make payments on time.
Credit scores range from 375 to 900 points, but those numbers mean little on their own. The numbers really don't mean much without knowing what the specific sliding scale You can assume that you are a better credit risk the higher your score is. Under mortgage standards, a score of 650 or higher indicates an excellent credit risk and good credit history.
A score below 620 may prevent a borrower from getting the best interest rates, as they may be considered a greater credit risk-but it does not mean that they can't get credit. The process will probably be lengthier and, as noted, the terms may be less appealing, but often credit can still be obtained.
While the credit scoring system is far from perfect, it is under improvement all the time. With the Fair Credit Reporting Act going into effect, people will actually have more access to their own credit histories without having to pay for it.
The act also requires agencies to respond to requests for investigation of dubious items on the credit history. In years past, it was not uncommon to write letter after letter and never receive an answer. Come September that will all change. == Find out how to repair your credit. Discover why a good credit report is vital to your financial future, and how to make it the best Click http://www.credit-repair-101.com/
** Attn Ezine editors / Site Owners ** Feel free to reprint this article in its entirety in your ezine or on your site so long as you leave all links in place, do not modify the content and include my resource box as listed above.
About the author: John Simpson works in software development. A few years ago, he got in trouble with credit card debts. Now he's written a series of articles explaining how he recovered, and repaired his credit.
The latest information and news on Credit Repair:
[CaRP] Can't open cache file.
[CaRP] Unable to create/open RSS cache file.
Credit Repair: Beyond the Fair Credit Reporting Act (Wellsville Daily Reporter)
(ARA) - Bad credit can happen to good people. On a day-to-day basis, you can't control all the factors that influence your credit score. What's more, credit reports often contain errors.
Free Credit Repair Secrets Teach Consumers How To Fix Ugly Credit (PR Web via...
Sarasota, FL (PRWEB) November 9, 2006 -- FixMyUglyCredit has launched a free credit repair e-course at www.
Avoid Home Repair Nightmares (The Motley Fool)
Americans spent more than $200 billion on home repair/remodel projects in 2005 and have shown few signs of slowing up in 2006, which means that there are a whole lot of very happy contractors out there, bank accounts bulging. But their happiness doesn't necessarily equate with the homeowner's.
Free Credit Repair Secrets Teach Consumers How To Fix Ugly Credit (PR Web)
From the comfort of home, people with damaged credit can fix their own credit with free step-by-step, easy-to-understand strategies and secrets from FixMyUglyCredit.com. (PRWeb Nov 9, 2006) Trackback URL: http://prweb.com/pingpr.php/WmV0YS1NYWduLVByb2YtUGlnZy1NYWduLVplcm8=
Bad Credit and Home Refinance (Kewanee Star Courier)
(ARA) - Mortgage rates are at historic lows, and it seems like everyone's jumping on the refinance bandwagon these days. But is it really a good idea for people with bad credit?
Avoid Home Repair Nightmares (The Motley Fool)
How to find the right person for the job.
Managing Your Credit Can be as Easy as Clicking a Mouse (Ridgecrest Daily Ind...
(ARA) - Managing your credit can be like balancing a plate in an old circus act - look away for just a moment and everything can come crashing down around you. But the task doesn't have to be that hard. In fact, online credit monitoring and management tools can make it as easy as clicking a mouse.
Police: Fake ?Uzi? taken into credit union (Fort Wayne Journal Gazette)
Two juveniles were taken into police custody Thursday morning after they were seen carrying what turned out to be a fake weapon into the Three Rivers Credit Union on Bluffton Road, police said.
Starting a PC Repair Business (Entrpreneur.com)
10 smart tips that will help you start and grow your computer repair service
The week in review (The Cincinnati Enquirer)
By now, you know the storyline from Tuesday's election: Democrats won big at the federal, state and county levels. Here's The Enquirer's take on some of the other election winners and losers.