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Credit Scoring Systems
Credit scoring is for estimating your credit worthiness. Credit scoring services are to show you in 3 digits your financial state and chances to obtain a loan. Your credit score and report data is also used beyond lending, Employers and insurers also tend to check out your credit scoring and report before making decisions about you. Credit score is simply a boiling down from your .In fact it’s a digital boiling down of your credit report calculated by analyzing statistics of your credit report. Credit scoring depends entirely on your credit report data changes.
There are a lot of credit scoring systems. Usually all credit scoring companies develop their own credit scoring systems and models basing on calculating statistics and picking up characteristics that are important for some concrete field . As it was said already, credit scoring systems compute credit score primary from the information in your credit report. So, what info is usually taken in consideration? In the most widespread credit scoring model that is called FICO score the following characteristics are considered :
payment history (35% of the score “weight”)
owed amounts (30%)
length of credit history (15%)
types of credits in use (10%)
new applications for credits (10%)
No matter what credit scoring systems are used, the Equal Credit Opportunity Act forbids credit reporting companies considering factors like race, religion, gender, marital status, job position, income, height, weight.
The usual grade for credit scoring is from 300 to 850 points. If you got more than 720 points, you have a good credit scoring and a chance to obtain the loan you want at the best rate. The average credit scoring result which permits to pay usual market rates for credits is 680-720 points. 580 and less points will not permit you to get a loan or to get it on a higher than usual rate.
Credit scoring systems nowadays are much more superior to the previous credit scoring method when a loan officer evaluated the creditworthiness of a person. That method was awfully biased. There was no guarantee that credit scoring reflects the real creditworthiness. Credit scoring systems that exist today aren’t ideal. But still we can say that credit scoring companies nowadays use the most developed model.
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TIP of the day:
You have the right under federal law to challenge items on your credit report. The credit bureau then has 30 days to decide whether that item should be removed.
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