Tips for Credit
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What is credit scoring?
The credit scoring process includes Information about you and your credit experiences, such as paying back bills, the number and type of open accounts, payments you made late, collection activity, outstanding debt, and the age of your accounts, are collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. This system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points, or credit score, will help predict how creditworthy you are. The main thing creditors are loking for are how likely it is that you will repay a loan and make the payments when due.
Because your credit report is an important part of many credit scoring systems, it is very important to make sure it’s accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:
Why is credit scoring used?
How is a credit scoring model developed?
A credit scoring system may not use certain characteristics under the equal credit opportunity act:
What can I do to improve my credit score?
Concentrate on the following to improve your score under most models:
Denied credit or the terms are not what you wanted?
An example of Acceptable reasons for denial include:
Unacceptable reasons include:
Denied credit because you are too close to your credit limits on your charge cards or you have too many credit card accounts? Try paying off your balances or closing some accounts then reapplying.
What do you do if you are Denied credit because of information from a credit report? 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 had to say specifically. This information is free only 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.
The bottom line is if you didn’t get the rate or credit terms you wanted or was denied credit, ask the creditor if a credit scoring system was used and ask what 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. If you feel you have dealt with an unfair or deceptive business send the FTC a buzz at www.ftc.gov or 1-877-FTC-HELP..
Find out more about credit profiles