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Credit Scores --
FAQ's about Credit Scores |
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| credit scores - credit history - good
credit - bad credit - improve credit reports |
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| What
are credit scores? |
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| Credit scores is a sum used by lenders
as an indicator of how likely you are to repay your
loans. Your credit scores are generated by a mathematical
formula utilizing the data from your TransUnion,
Equifax or Experian credit reports. Lenders have
been using credit scores as part of the lending
decision for more than 20 years. |
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| What
factors influence my credit scores? |
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| Various factors determine
your credit scores, including the following: |
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Payment History |
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Outstanding Debt |
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Length of Credit History |
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Severity and frequency of derogatory
credit information such as bankruptcies, charge-offs,
and collections |
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The amount of credit used compared
to the credit available |
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| How
do my credit scores affect me? |
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| Your credit scores are
an important indicator of your financial health.
Lenders use your credit scores to determine: |
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Whether or not you are a good candidate
for a loan |
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What type of interest rate you will
pay |
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| While your credit scores
are a key determinant of your creditworthiness,
lenders also examine the information on your credit
reports and your loan application. Regularly checking
your credit reports enables you to: |
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Be informed of the most up-to-date
information in your credit history |
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Correct any inaccuracies, to make
sure that your credit data is a true depiction of
your credit record and increasing your chances of
receiving credit under the best possible terms |
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| What
is a "good" credit score? |
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| There are
several types of credit scores available. Typically,
the higher the score, the better. Each lender decides
what credit score range it considers to be a good
credit risk or a poor credit risk. For this reason,
the lender is the best source to explain what your
credit scores mean in relation to the final credit
decision. After all, they determine the criteria
used to extend credit. Credit scores are only one
component of information evaluated by lenders. |
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| What
is credit scoring? |
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| Credit scoring is a method
used by lenders to help decide whether or not you
are a good candidate for a loan. |
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| Lenders employ
a credit scoring system to determine your credit
scores: |
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Compares information in your credit
reports to the performance of consumers who have
similar credit characteristics |
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Examines many credit characteristics
including your payment history, the number and kind
of accounts you have, the number and frequency of
late payments, and any collections or bankruptcies |
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| Generally speaking, positive
credit characteristics make your credit scores higher
and help you to qualify for better loans. Negative
characteristics make your scores lower and may interfere
with your ability to qualify for the best loan terms. |
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| How
is a credit scoring model developed? |
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| A lender creates a credit
scoring model by using several criteria: |
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| Lenders employ
a credit scoring system to determine your credit
score: |
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Selecting a large sampling of customers |
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Analyzing the data in their credit
reports to determine which factors relate to creditworthiness |
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Assigning a degree of importance
to each of the factors, based on how accurate a
predictor it is in determining who will repay their
loan on time |
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| * These online applications are subject
to the terms and conditions as described in the Important
Information Section of the individual applications. |
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