What's Your Credit Report Score? Ignorance Could Cost You Dearly |
|
Your credit report score is the determining factor in whether you are eligible to apply for a loan or not. In America, there are still many people who remain unaware of the power of a credit report score. During the last decade, a number of people had been rejected for accessing loans only because of their low credit score. So, it's important to know your credit score to avoid making blind attempts at getting a loan. Let's take an example. Susan Bennet, a marketing manager for a company and a resident of Ohio, applied for a loan to buy a luxury sedan. When she approached the bank with her loan application, the loan officer told her that she would not get the loan. Shocked, Susan stood dumb for a minute. She could not figure what went wrong with her loan application. But it's anybody's guess what went wrong with her. Susan had a very low credit report score that resulted in her credit denial. In fact, like many Americans, Susan was also unaware of the value of her own credit report score. If you want to buy a car or a new house by taking a loan, you need to check your credit report score first. If your credit score is good, you would easily get a loan. In fact, most lenders would compete among themselves to get your business. But things would be just the opposite if your credit score were not good. With a low credit score, it is really tough to find a lender. Fair Isaac, a California-based company, invented the concept of credit report score. Credit report score, especially the FICO credit report score from Fair, Isaac, is a tool used by lenders to predict the risk of a consumer defaulting on a loan. In America, there are three national credit bureaus that provide FICO scores to the lenders. These three credit bureaus are Experian, Equifax, and TransUnion. A FICO credit report score that ranges from 300 to 850 measures your creditworthiness. The higher the score, the lower the risk and interest rate. Most Americans have a credit score between 600 and 800. According to Fair Isaac, any score above 720 is a very good score to qualify for a loan. A score of 750 or higher can mean an interest rate on your loan 4% lower than someone with a 500 credit score. Credit report score is calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Developing these models involves studying how thousands, even millions, of people have used credit. Score-model developers find predictive factors in the data that have been proven to indicate future credit performance. Models can be developed from different sources of data. Credit-bureau models are developed from the information in consumer credit-bureau reports. A credit bureau analyzes a borrower's credit report score based on the following points: --Late payments --The amount of time the credit has been established --The amount of credit used versus the amount of credit available --Length of stay at the present residence --Employment history --Negative credit information such as, bankruptcies, charge-offs, collections, etc. If you find any kind of error or inaccuracy on your credit report, you can apply to the issuing credit bureau to get it corrected. For that, you can contact the bureau in person or online. Whatever you do, you need to provide some of your personal information like: your name, date of birth, address, social security numbers, phone number, spouse's name etc. The bureau reviews your information and runs an investigation by contacting your creditors. And if any error is detected, it is corrected immediately and you would be subsequently informed by e-mail or phone. And once the error is corrected, you can expect a rise in your credit report score. |
