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Email: bobtaylorprop @ gmail.com


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Does credit scoring help me?

Yes. Scoring speeds and simplifies the credit application process. Scores can be delivered electronically in seconds and are easy for lenders to read and interpret. This means quicker answers on credit applications. Because scoring is objective, there is also less chance of lending discrimination. Applications can be evaluated fairly based on factors proven indicative of repayment performance.

Why do lenders use credit scores?

While not all lenders use scores, those who do, use them to help make fast, unbiased decisions on which applicants are likely to pay them back, and pay them back on time. Lenders want to extend credit to people who will repay and avoid lending to those who will not. A scoring model quickly and precisely evaluates your credit history and distills the likelihood that you will repay as agreed into one easy-to-understand number.

Before the widespread use of credit scoring, a loan officer could make a subjective interpretation of how likely you were to repay as agreed. Personal judgment could (and often did) influence whether or not people got the credit they applied for.

The availability of credit scores has changed that. Scoring models are objective evaluators, a real plus for consumers.

If one lender turned down my request for credit, will all the others? No necessarily. If you've ever shopped for an auto loan, you know that you may qualify at one bank or credit union, yet be turned down somewhere else. Lenders set credit policies for their loan and credit portfolios. They determine the level of risk they can take on for a particular loan product and what interest rate and/or fees to charge to compensate for that risk.

Scores by themselves do not identify individuals as "acceptable" or "unacceptable" customers. They are just one of the factors lenders use when deciding whom to loan to. How big a role the score plays in the final decision depends on the individual lender.

Where do scores come from?

Statistical models located at the major credit bureaus weigh and measure many pieces of information in order to generate a score. A credit score is a composite based on a large number of complex calculations. Scoring models can weigh and balance these varying factors much more quickly and precisely than a human trying to evaluate the same information without the benefit of computerized models.

What's a good score to get?

Sounds like an easy question to answer, but it's not. Individual lending institutions decide for themselves which scores are acceptable and which are not for different types of loans or credit. The score is a number, not a recommendation. The scoring user--the lender--makes the decision. That decision may be to offer people with scores indicating higher risk, a higher interest rate rather than turning them down altogether. Or a lender might decide to lower the interest rate for someone who presents minimal risk.

How can I improve my score?

The key to improving your score is to consistently pay bills on time. Credit scores are based on general repayment "patterns," the mix of credit cards and loans you have, and any indications that you are actively looking for more credit. Your score will improve, as you continue to handle your credit obligations responsibly.

Think of a score as a "snapshot" of credit risk-- it reflects your risk picture at a specific point in time. A snapshot doesn't change, but when you take another one, you will probably look a little different. Similarly, when your credit information changes, your score changes to reflect that. That's why lenders obtain your most recent score whenever you apply for credit.

What is my score?

And how do I know it's correct? Your score changes every time information is added to your credit bureau file, so you don't have one single score. Your score may change when you pay a credit card bill, make a loan payment, or open a new line of credit.

Another reason you don't have just one score is that there are a variety of scoring systems in use, and they vary widely in their numbering. A 475 from one type of system may not indicate the same level of risk as a 475 from another system.

You can ask your lender to tell you whether a credit score was used as part of the decision. If you were denied credit, you should be told the reasons for denial (called adverse action notification), so you can understand your own credit risk snapshot.

If you think your credit report contains mistakes that may have affected your credit score, you may be right. Request a copy of your credit report. An error in a credit report may well affect your score. The three major U.S. bureaus--Equifax, Trans Union and Experian (formerly TRW)--all have procedures in place for correcting information promptly.

How do I obtain a copy of my credit bureau report?

If you're turned down for credit, you're entitled to a free copy of your credit report. Even if you are not turned down, it's a good idea to review your credit report from each bureau before making a major purchase or at least once a year to make sure the information is correct. Your request for a copy of your credit bureau report will not affect your credit score in any way. Should you find an error in the report, the credit bureau will investigate the item and respond to you within 30 days. Credit bureaus are required by law to follow up on disputes in a timely manner.

Equifax: (800) 685-1111
Trans Union: (610) 690-4909
Experian (formerly TRW): (800) 682-7654

WHAT'S IN A SCORING MODEL?

  • Recent payment history
  • The amount of credit you have access to and are using
  • How long a credit history you have
  • Whether you've been shopping for credit
  • Notification of collection and public record items such as liens and bankruptcies

WHAT'S NOT?

By law, lenders--and scoring models--are prohibited from considering factors such as:

  • Your race - Your religion - Your gender
  • Whether you're married, single or divorced
  • Where you were born