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How Unjustified Consumers Get Their Credit Report Score? |
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Consumers who have been denied credit at some stage or have paid a higher interest rate because of a bad credit history generally maintain a low credit report score. But, now for the benefit of such consumers, Fair Isaac has created a new credit report score designed to predict credit risk for individuals with little or no credit history. Fair Isaac Co. is widely engaged in mortgage, auto loan and credit card industry. The new FICO expansion credit report score draws on information in an array of small credit reporting agencies outside the realm of the three major credit bureaus, says Craig Dillon, vice president of scoring solutions at Fair Isaac. The new credit report score draws on data from industries such as pay day loan companies, rent-to-own stores and banking organizations that share information about people who misuse overdraft protection on checking accounts. The company's market research, which is confirmed by others in the credit industry, indicates that while about 160 million consumers have enough information on their credit files to generate a valid FICO credit report score, as many as another 50 million do not. The consumers who might get a break with the new credit report score include recent immigrants to the United States (whose good payment histories from their home countries don't get transferred to the US credit reporting system), college students, new divorcees and widows, those with low incomes, and people whose cultures don't trust financial institutions or large national organizations. A FICO credit report score is a three-digit number used to predict the risk involved in extending credit to a particular individual. A statistical algorithm that compares a person's credit history to those of millions of other consumers uses a scale of 300 to 850. Most people will have credit report scores between 600 and 800 based on the information in the credit bureau records to generate a credit report score. This information comes from such places as mortgage companies, credit card issuers and auto financing companies. Without sufficient information at a credit bureau to generate a FICO score, or negative information that produces a very low credit report score, many consumers either are turned down for credit applications or end up paying more for it. Even if they have never paid their rent or their utilities late, these companies generally don't report payment data to the credit bureaus. Many times, the need to gather a year's worth of rent receipts or utility payments discourages borrowers from even trying to get a mortgage. To have some one like Fair Isaac convert that information to a credit report score is a real help to the industry. If it operates the way it should, it is indeed a truly win-win situation. The new credit report score does not help individuals who have a low FICO credit report score because they've messed up their credit by paying their bills late or simply disowning them. The prospect of having a tool available to simplify the underwriting process of credit report score would be a god idea, which would be in complete contrast to the current process of collecting data by hand. It's time consuming, labor intensive and subject to fraud. One of the great strengths of mainstream credit industry is its flexibility in rewarded the right moves in the right direction. If it's relying solely on negative data, it could hurt consumers doubly. It is difficult to get positive information because it takes more energy to collect, file and report. Plus, competitors don't want to give away information on their good customers. But Fair Isaac's data sources do provide both positive and negative credit information, and they have confidence that the data is strong enough to provide a valid credit report score. There are people most desperate to get credit and most vulnerable to life situations affecting their ability to pay. These people have bad credit histories and bad credit report score. Such people are in desperate need of improving their credit report score by applying various remedial measures to their financial life. |
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