Posts Tagged Credit Scoring
Do Personal Credit Scores Affect Your Ability to Borrow Money?
Jack Igan asked:
You Should Know Something About Your Personal Credit Score and understand how a low personal score can affect your ability to secure a credit loan.
The prospect of applying for credit unnerves many people unnecessarily. Just be truthful when you answer the questions and you should not have any problems. In our everyday lives we fill out “applications” rather frequently. Aside from the more obscure employment application we fill out more familiar forms for people several times a week. At least I do.
I spend a lot of time on my computer and the Internet and I am always requesting information. Usually they require your name, password, username, but quite often they will ask for additional information such as your address, date of birth, telephone number. Try requesting a telephone or cable service or posting a certified letter with a return receipt without first filling out a form.
The day you are born you get a birth certificate and a social security number; both follow you for life. Everytime you do a search on Google a record is made and saved in a database somewhere in California. This record includes information from your computer so they can trace that search right back to you and your house or your office.
So, by the time you get around to requesting credit, you are already in one or more databases and your personal information is usually available to anyone who wants to buy it. Everyone already knows who you are. So breathe easy and just go ahead and fill in the form.
What does this have to do with credit scoring and how does it affect me? All I want to do is buy a new (fill in the blank).
Any company that is in the business of lending money to its customers has to know with reasonable certainty that the borrower will pay it back. Credit risk is the name of the game but managing that risk is a science and a skill combined.
If any company makes it a practice to take unnecessary risks by approving bad loans it increases the likelihood they will loose money. If that same company only extends credit to no-risk or prime risk borrowers they will ignore a sizeable group of hard working, honest, and responsible people who need credit. This group will fall somewhere between the high risk groups and the low risk groups but represents an enormous amount of profitable business. Not working with this ‘average’ group will cost any lender a sizeable amount of business income and opportunities for commensurate profits.
To help make it more profitable for companies to work with these borrowers a system of credit scoring was developed about twenty-five years ago in an attempt to forecast an assumed credit reliability model against which any single person applying for credit would be rated. Basically, whenever you buy anything on time, that purchase and your record of repayments is recorded in a database under your name and social security number. These records are constantly updated each time you make additional credit purchases or repayments on a loan.
Your personal credit score is a fluctuating number based on your individual record of prompt on-time payments to satisfy your loans, the number and amounts of loans you have made, the number and amounts of your current outstanding loans, and how quickly or how slowly you have lived up to your obligations to repay each of those loans, your total debt, how detailed you credit history is, information found in public records, and other factors.
Opening a new account or making a payment could operate to change your score. Your information is categorized, sorted, and analyzed against previously created statistical credit models. The result of all of these reports and comparisons represents a predictive analysis of your credit worthiness, or your personal credit score.
The major credit reporting agencies are using a recently consolidated scoring system called FICO, developed by The Fair Isaac Corporation. Experian uses a proprietary version of FICO called “The Vantage System”. Vantage has a scoring range from “501 to 990″. The older FICO system has a range of scoring from “300 to 850″. In a nutshell, the higher you’re score, the lower your risk, and all other things being equal. The problem here is that all things are not equal.
Interpretation of the results is pretty much up to the lender and it is hard to get a consensus on what is an average score. Not all credit companies interpret the available information in exactly the same manner. Suze Ormand, a CNBC financial guru and television personality quotes “703″ as an average FICO credit score. A personal loan credit score of 500 would probably place you at the lower end of the scale.
Your credit score affects every aspect of your financial life. Your ability to repay a loan and the probability or your repaying that loan are the highest considerations for any lender and he uses your personal credit score to determine your credit worthiness.
It is a paradox that the major credit reporting companies all use the same credit scoring models or a proprietary version but none are all that willing to tell you what threshold, or “point score” they use to deny you credit or what the “number” is that dictates the interest rate they will charge when you buy that new car, HDTV, or boat. For a more complete personal credit report that includes the actual credit score assigned you by that reporting company and a chart comparing you to other borrowers nationwide, you have to pay a fee, usually about $15.00.
There are many websites where you can get a free personal credit report. Just do an internet search using the phrase “free credit report”. I would suggest using one of the top credit agencies only because their reports may be more up to date. you should note however that the free credit report you will receive is not the same report you would get as a paying customer. Unless you have a serious problem with your credit it should be adequate for your needs. If you need a more detailed report you can always order one if you think it’s needed.
I have no interest or affiliation with any of them. They are listed here as a convenience to you, only. One caveat when visiting these websites; they all offer a free credit report but each site has enhanced additional services that do cost money.
Tyrone
You Should Know Something About Your Personal Credit Score and understand how a low personal score can affect your ability to secure a credit loan.
The prospect of applying for credit unnerves many people unnecessarily. Just be truthful when you answer the questions and you should not have any problems. In our everyday lives we fill out “applications” rather frequently. Aside from the more obscure employment application we fill out more familiar forms for people several times a week. At least I do.
I spend a lot of time on my computer and the Internet and I am always requesting information. Usually they require your name, password, username, but quite often they will ask for additional information such as your address, date of birth, telephone number. Try requesting a telephone or cable service or posting a certified letter with a return receipt without first filling out a form.
The day you are born you get a birth certificate and a social security number; both follow you for life. Everytime you do a search on Google a record is made and saved in a database somewhere in California. This record includes information from your computer so they can trace that search right back to you and your house or your office.
So, by the time you get around to requesting credit, you are already in one or more databases and your personal information is usually available to anyone who wants to buy it. Everyone already knows who you are. So breathe easy and just go ahead and fill in the form.
What does this have to do with credit scoring and how does it affect me? All I want to do is buy a new (fill in the blank).
Any company that is in the business of lending money to its customers has to know with reasonable certainty that the borrower will pay it back. Credit risk is the name of the game but managing that risk is a science and a skill combined.
If any company makes it a practice to take unnecessary risks by approving bad loans it increases the likelihood they will loose money. If that same company only extends credit to no-risk or prime risk borrowers they will ignore a sizeable group of hard working, honest, and responsible people who need credit. This group will fall somewhere between the high risk groups and the low risk groups but represents an enormous amount of profitable business. Not working with this ‘average’ group will cost any lender a sizeable amount of business income and opportunities for commensurate profits.
To help make it more profitable for companies to work with these borrowers a system of credit scoring was developed about twenty-five years ago in an attempt to forecast an assumed credit reliability model against which any single person applying for credit would be rated. Basically, whenever you buy anything on time, that purchase and your record of repayments is recorded in a database under your name and social security number. These records are constantly updated each time you make additional credit purchases or repayments on a loan.
Your personal credit score is a fluctuating number based on your individual record of prompt on-time payments to satisfy your loans, the number and amounts of loans you have made, the number and amounts of your current outstanding loans, and how quickly or how slowly you have lived up to your obligations to repay each of those loans, your total debt, how detailed you credit history is, information found in public records, and other factors.
Opening a new account or making a payment could operate to change your score. Your information is categorized, sorted, and analyzed against previously created statistical credit models. The result of all of these reports and comparisons represents a predictive analysis of your credit worthiness, or your personal credit score.
The major credit reporting agencies are using a recently consolidated scoring system called FICO, developed by The Fair Isaac Corporation. Experian uses a proprietary version of FICO called “The Vantage System”. Vantage has a scoring range from “501 to 990″. The older FICO system has a range of scoring from “300 to 850″. In a nutshell, the higher you’re score, the lower your risk, and all other things being equal. The problem here is that all things are not equal.
Interpretation of the results is pretty much up to the lender and it is hard to get a consensus on what is an average score. Not all credit companies interpret the available information in exactly the same manner. Suze Ormand, a CNBC financial guru and television personality quotes “703″ as an average FICO credit score. A personal loan credit score of 500 would probably place you at the lower end of the scale.
Your credit score affects every aspect of your financial life. Your ability to repay a loan and the probability or your repaying that loan are the highest considerations for any lender and he uses your personal credit score to determine your credit worthiness.
It is a paradox that the major credit reporting companies all use the same credit scoring models or a proprietary version but none are all that willing to tell you what threshold, or “point score” they use to deny you credit or what the “number” is that dictates the interest rate they will charge when you buy that new car, HDTV, or boat. For a more complete personal credit report that includes the actual credit score assigned you by that reporting company and a chart comparing you to other borrowers nationwide, you have to pay a fee, usually about $15.00.
There are many websites where you can get a free personal credit report. Just do an internet search using the phrase “free credit report”. I would suggest using one of the top credit agencies only because their reports may be more up to date. you should note however that the free credit report you will receive is not the same report you would get as a paying customer. Unless you have a serious problem with your credit it should be adequate for your needs. If you need a more detailed report you can always order one if you think it’s needed.
I have no interest or affiliation with any of them. They are listed here as a convenience to you, only. One caveat when visiting these websites; they all offer a free credit report but each site has enhanced additional services that do cost money.
Tyrone
Credit Counseling – What Can I See in My Credit Report?
Mark Andrade asked:
Your credit report contains a snapshot of information about you and your credit history and can have a major impact on your life. Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
Personal Unique Identifying Information.
This includes your full name, any known aliases, current and previous addresses, date of birth, social security number, current and past employment information, plus similar information about your spouse when applicable. Usually it’s up to you to update this information and it does not apply in credit scoring calculations.
Account Information.
The accounts you have with banks, retailers, credit-card issuers, utility companies, and other lenders are listed by type of loan such as mortgage, student loan, revolving credit, or installment loan. Lenders report the date the account was opened, your credit limit, account balance, monthly payment, any co-signers, and payment history on each account you have established with them.
Account Inquiries.
Inquiries appear on your credit report when you apply for a loan and you authorize the lender to request your credit report. The list will include the names of everyone who accessed your credit report within the last year, or two years if the request was employment related. The report will differentiate between “voluntary” inquiries, triggered by your requests for credit, and “involuntary” inquires, such as when lenders order your report to determine your creditworthiness for a pre-approved credit offer.
Public Record Information
Credit reporting agencies are allowed to collect and report on public record information from state and county courts. This public record information includes bankruptcies, foreclosures, lawsuits, wage attachments, tax and other liens, judgments, and, in some states, overdue child support.
Collection Items.
Information on overdue debt from collection agencies is typically included on your credit report.
You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian, and TransUnion. This annual credit report can be requested through AnnualCreditReport.com or by contacting the companies directly by phone or by mail.
To process your request, you will need to provide specific personal information, such as your name, current and previous addresses, telephone number, social security number, and date of birth. Also, to verify your identity, other information such as a copy of your driver’s license, utility bill, or bank statement may be required. Keep in mind that the three large credit bureaus do not necessarily share information with each other. The content of your credit report can be different at each bureau, so it’s a good idea to request copies from each one.
Cody
Your credit report contains a snapshot of information about you and your credit history and can have a major impact on your life. Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information.
Personal Unique Identifying Information.
This includes your full name, any known aliases, current and previous addresses, date of birth, social security number, current and past employment information, plus similar information about your spouse when applicable. Usually it’s up to you to update this information and it does not apply in credit scoring calculations.
Account Information.
The accounts you have with banks, retailers, credit-card issuers, utility companies, and other lenders are listed by type of loan such as mortgage, student loan, revolving credit, or installment loan. Lenders report the date the account was opened, your credit limit, account balance, monthly payment, any co-signers, and payment history on each account you have established with them.
Account Inquiries.
Inquiries appear on your credit report when you apply for a loan and you authorize the lender to request your credit report. The list will include the names of everyone who accessed your credit report within the last year, or two years if the request was employment related. The report will differentiate between “voluntary” inquiries, triggered by your requests for credit, and “involuntary” inquires, such as when lenders order your report to determine your creditworthiness for a pre-approved credit offer.
Public Record Information
Credit reporting agencies are allowed to collect and report on public record information from state and county courts. This public record information includes bankruptcies, foreclosures, lawsuits, wage attachments, tax and other liens, judgments, and, in some states, overdue child support.
Collection Items.
Information on overdue debt from collection agencies is typically included on your credit report.
You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian, and TransUnion. This annual credit report can be requested through AnnualCreditReport.com or by contacting the companies directly by phone or by mail.
To process your request, you will need to provide specific personal information, such as your name, current and previous addresses, telephone number, social security number, and date of birth. Also, to verify your identity, other information such as a copy of your driver’s license, utility bill, or bank statement may be required. Keep in mind that the three large credit bureaus do not necessarily share information with each other. The content of your credit report can be different at each bureau, so it’s a good idea to request copies from each one.
Cody
What Is A Credit Report
Geoff Hibbert asked:
A credit report is a history of your payments, not just a snapshot of where you are at the moment, says Maxine Sweet, vice president of public affairs for Experian, one of the three major credit reporting agencies.
A credit report is a crucial document that reflects your credit status. A credit report is a summary of your financial reliability for the most part, your history of paying debts and other bills. A credit report is a profile of your financial life that’s compiled by a credit reporting agency or credit bureau. A credit report is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service.
A credit score is like the numerical version of your credit report. Credit scoring is the process of using a proprietary mathematical algorithm to create a numerical value that describes an applicants overall creditworthiness. Credit score determines credit worthiness and with high credit worthiness borrowing capabilities increase.
Credit scores typically range from about 300 to 850. Scores above 700 are a sign of financial health and can earn you relatively low prime interest rates and favourable lending terms. Scores above 700 generally are considered to be good credit scores and scores above 775 are considered excellent by most lenders.
You can think of a high credit score as a merit badge, if you will. You will be able to obtain more credit much more easily and creditors and lenders will feel much more comfortable loaning you money, as you have obviously been a reliable borrower in the past. While you can obtain a free copy of your credit report each year, you will need to purchase your credit score.
With the adoption of risk-based pricing on almost all lending in the financial services industry, this report has become even more important since it is usually the sole element used to choose the annual percentage rate (APR), grace period and other contractual obligations of the credit card or loan.
Reports may contain information on accounts that have been long closed or paid off. A lender may perceive many inquiries over a short period of time on a person’s report as a signal that the person is in financial difficulty and is looking for loans and will possibly consider that person a poor credit risk.
When creditors report an excessive number of late payments, or trouble with collecting payments, the score suffers. Derogatory information can generally remain on your credit report for up to seven years, except for bankruptcy information, which may be reported for 10 years. Note that it is not the credit reporting agencies that decide whether a credit history is adverse, but depends on the individual lender.
What is not in my credit report? Your credit report typically does not contain information about your checking and savings account balances, brokerage accounts, medical history, race, sex, religion, national origin, or your driving record nor in most cases will it contain details of your rental agreement if you live in a tenanted property.
Building or re-building a credit report that has become bad does not have a quick-fix situation. The first step to improving and repairing a credit report is to ask for help. The only thing that can fix a credit report is time and a positive payment history.
A good debt management or credit repair company can show you the correct techniques to bring your finances under control. Once you have rebuilt your reputation your credit score will grow and you will find credit at good terms and interest rates much easier to come by.
Kansieo.com
A credit report is a history of your payments, not just a snapshot of where you are at the moment, says Maxine Sweet, vice president of public affairs for Experian, one of the three major credit reporting agencies.
A credit report is a crucial document that reflects your credit status. A credit report is a summary of your financial reliability for the most part, your history of paying debts and other bills. A credit report is a profile of your financial life that’s compiled by a credit reporting agency or credit bureau. A credit report is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service.
A credit score is like the numerical version of your credit report. Credit scoring is the process of using a proprietary mathematical algorithm to create a numerical value that describes an applicants overall creditworthiness. Credit score determines credit worthiness and with high credit worthiness borrowing capabilities increase.
Credit scores typically range from about 300 to 850. Scores above 700 are a sign of financial health and can earn you relatively low prime interest rates and favourable lending terms. Scores above 700 generally are considered to be good credit scores and scores above 775 are considered excellent by most lenders.
You can think of a high credit score as a merit badge, if you will. You will be able to obtain more credit much more easily and creditors and lenders will feel much more comfortable loaning you money, as you have obviously been a reliable borrower in the past. While you can obtain a free copy of your credit report each year, you will need to purchase your credit score.
With the adoption of risk-based pricing on almost all lending in the financial services industry, this report has become even more important since it is usually the sole element used to choose the annual percentage rate (APR), grace period and other contractual obligations of the credit card or loan.
Reports may contain information on accounts that have been long closed or paid off. A lender may perceive many inquiries over a short period of time on a person’s report as a signal that the person is in financial difficulty and is looking for loans and will possibly consider that person a poor credit risk.
When creditors report an excessive number of late payments, or trouble with collecting payments, the score suffers. Derogatory information can generally remain on your credit report for up to seven years, except for bankruptcy information, which may be reported for 10 years. Note that it is not the credit reporting agencies that decide whether a credit history is adverse, but depends on the individual lender.
What is not in my credit report? Your credit report typically does not contain information about your checking and savings account balances, brokerage accounts, medical history, race, sex, religion, national origin, or your driving record nor in most cases will it contain details of your rental agreement if you live in a tenanted property.
Building or re-building a credit report that has become bad does not have a quick-fix situation. The first step to improving and repairing a credit report is to ask for help. The only thing that can fix a credit report is time and a positive payment history.
A good debt management or credit repair company can show you the correct techniques to bring your finances under control. Once you have rebuilt your reputation your credit score will grow and you will find credit at good terms and interest rates much easier to come by.
Kansieo.com