Nevertheless, scoring models generally evaluate the following types of
information in your credit report:
- Have you paid your bills on time?
Payment history typically is a significant factor. It is likely that your score will
be affected negatively if you have paid bills late, had an account referred
to collections, or declared bankruptcy, if that history is reflected on your
credit report.
- What is your outstanding debt?
Many scoring models evaluate the amount of debt you have compared
to your credit limits. If the amount you owe is close to your credit limit,
that is likely to have a negative effect on your score.
- How long is your credit history?
Generally, models consider the length of your credit track record. An
insufficient credit history may have an effect on your score, but that can
be offset by other factors, such as timely payments and low balances.
- Have you applied for new credit recently?
Many scoring models consider whether you have applied for credit recently
by looking at "inquiries" on your credit report when you apply for credit.
If you have applied for too many new accounts recently, that may
negatively affect your score. However, not all inquiries are counted.
Inquiries by creditors who are monitoring your account or looking at credit
reports to make "prescreened" credit offers are not counted.
- How many and what types of credit accounts do you have?
Although it is generally good to have established credit accounts, too
many credit card accounts may have a negative effect on your score.
In addition, many models consider the type of credit accounts you have.
For example, under some scoring models, loans from finance companies
may negatively affect your credit score.
Scoring models may be based on more than just information in your credit report.
For example, the model may consider information from your credit application as
well: your job or occupation, length of employment, or whether you own a home.
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To improve your credit score under most models, concentrate on paying your
bills on time, paying down outstanding balances, and not taking on new debt.
It's likely to take some time to improve your score significantly.
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, credit scoring systems must be based on a big enough sample. Remember
that these systems generally vary 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. And 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
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What Happens If You Are Denied Credit Or Don't Get The Terms You
want?
If you are denied credit, the Equal Credit Opportunity Act requires that the creditor
give you a notice that tells you the specific reasons your application was rejected
or the fact that you have the right to learn the reasons if you ask within 60 days.
Indefinite and vague reasons for denial are illegal, so ask the creditor to be specific.
Acceptable reasons include: "Your income was low" or "You haven't been
employed long enough." Unacceptable reasons include: "You didn't meet our
minimum standards" or "You didn't receive enough points on our credit scoring
system."
If a creditor says you were denied credit because you are too near your credit limits
on your charge cards or you have too many credit card accounts, you may want
to reapply after paying down your balances or closing some accounts. Credit
scoring systems consider updated information and change over time.
Sometimes you can be denied credit because of information from a credit report. If
so, the Fair Credit Reporting Act requires the creditor to give you the name, address
and phone number of the credit reporting agency that supplied the information.
You should contact that agency to find out what your report said. This information
is free if you request it within 60 days of being turned down for credit. The credit
reporting agency can tell you what's in your report, but only the creditor can tell
you why your application was denied.
If you've been denied credit, or didn't get the rate or credit terms you want, ask
the creditor if a credit scoring system was used. If so, ask what characteristics or
factors were used in that system, and the best ways to improve your application.
If you get credit, ask the creditor whether you are getting the best rate and terms
available and, if not, why. If you are not offered the best rate available because of
inaccuracies in your credit report, be sure to dispute the inaccurate information in
your credit report.All rights reseopyright© 1996-2002 - Disclaimer - Privacy Polic
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