Consumers Struggle To Know The Truth About Credit Report Score |
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Your credit report score, which is a three
digit number, has assumed immense importance as a handy indicator for the
lenders to predict the possibility of your paying or not paying your bills. The credit report score can have extensive repercussions on your financial life. Life will be a bed of roses if your credit report score is high with lenders vying with each other to offer you best terms and conditions on a variety of loans, whether credit cards, auto financing, home loans, mortgages for business loans or small business loans. On the other hand, if your credit report score is low or non-existent, your financial life will only have thorns everywhere and mainstream credit will only remain a dream. Even if you get a loan, the interest rate and fees will be sky high in view of the high risk involved. A bad or mediocre credit report score can result in the loss of thousands of dollars through high rates and fees in your lifetime. It is important to remember that even a single missed payment can knock off more than 100 points from your credit report score, thereby placing you in a high-risk group. Apart from loans, your credit report score is also used by landlords and insurance companies to evaluate your application. Consequently, to get cheaper insurance premiums and better apartments, you must have a good credit report score, whereas a bad credit report score can mean higher insurance premiums and difficulty in finding an apartment for rent. People are now becoming aware of the tremendous influence that FICO scores and credit report scores have in the minds of lenders while approving loans. This three-digit number can make all the difference in the decision making process. Fair Isaac, the founder of the FICO score and an authority in credit-scoring, is not in favor of divulging much information regarding credit report score to the general public as he feels that consumers wouldn't understand the nuances of credit scoring, or they would try to game the system if they knew more. It feels that its formulas would lose their predictive values if consumers started changing their behavior to boost their credit report score. There are other mortgage officials who are more sympathetic to the consumers and feel that they should be aware of the credit report score and the way it is computed. They even tried to explain how the numbers were created but Fair Isaac kept the formula details as a secret and wouldn't divulge the same. As such, loan officers' explanations were not correct and it was found people had much more information about credit report score. Naturally, there was a lot of resentment about the secrecy of the credit report score and matters came to a head in early 2000, when E-Loan, an Internet lender let consumers view their FICO credit report score. This continued for about a month when some 25,000 consumers took advantage of this free service and viewed their scores online and became aware of some basic information about what the numbers meant. A few months later, with demands from consumer advocates regarding disclosures and legislation proposed by lawmakers, Fair Isaac relented and posted the 22 factors affecting a credit report score. After some more time, the company relented further and agreed to provide the consumers with their credit report score and reports for a fee amounting to $12.95. For this service, the company entered into a partnership with credit bureau Equifax. This also gave the opportunity to the lenders to use credit report scores of many people to find potential future customers. The credit card companies and lenders also used this information to increase their sales pitch and sent out reams of pre-approved offers to prospective customers instead of waiting for these people to apply to them. |
