Maintain a Good Credit Score
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Maintain a Good Credit Score
Credit bureaus use information on file to determine one’s credit score. Activity
contained in the files provides a current status of one’s credit history. Credit scores are a fair measure to help lenders estimate potential risk. The three main credit bureaus are Experian, TransUnion, and Equifax. Credit scores are similar to grades received in school and range from 300 to 850 points (Consumer Reports, 2005.) As one would not want to have a failing grade in school, they would not want to have a failing credit score. The scores that credit bureaus issue are called FICO scores. FICO stands for Fair Isaac Corporation and is the company that developed the scoring system. The system was designed to give lenders a quick look at a potential borrower’s creditworthiness (Fair Isaac Corporation, 2001-2010.) Bureaus use information collected from credit card companies and banks. The three organizations look at the debt that is owed as well as the payment history of the consumer. They also check public records to determine whether there are bankruptcies or any outstanding taxes owed or any type of tax lien. A credit history tracks everything a person does; whether payments are made in a timely manner; when payments are made, it shows the number of days late one was; every time they apply for credit; and any time a credit account is opened or closed. The main factors used when calculating one’s FICO score are payment history, amount owed (outstanding credit,) length of credit history, new credit accounts opened, and the type of credit one currently has outstanding. In order for financial institutions to remain in business, they must protect their assets by assessing risks; therefore, a good case can be made that credit scores are a fair measure to help lenders estimate potential risks.
It is imperative that lenders use credit scores to decide whether to extend credit to someone as well as to determine the interest rate...
Credit bureaus use information on file to determine one’s credit score. Activity
contained in the files provides a current status of one’s credit history. Credit scores are a fair measure to help lenders estimate potential risk. The three main credit bureaus are Experian, TransUnion, and Equifax. Credit scores are similar to grades received in school and range from 300 to 850 points (Consumer Reports, 2005.) As one would not want to have a failing grade in school, they would not want to have a failing credit score. The scores that credit bureaus issue are called FICO scores. FICO stands for Fair Isaac Corporation and is the company that developed the scoring system. The system was designed to give lenders a quick look at a potential borrower’s creditworthiness (Fair Isaac Corporation, 2001-2010.) Bureaus use information collected from credit card companies and banks. The three organizations look at the debt that is owed as well as the payment history of the consumer. They also check public records to determine whether there are bankruptcies or any outstanding taxes owed or any type of tax lien. A credit history tracks everything a person does; whether payments are made in a timely manner; when payments are made, it shows the number of days late one was; every time they apply for credit; and any time a credit account is opened or closed. The main factors used when calculating one’s FICO score are payment history, amount owed (outstanding credit,) length of credit history, new credit accounts opened, and the type of credit one currently has outstanding. In order for financial institutions to remain in business, they must protect their assets by assessing risks; therefore, a good case can be made that credit scores are a fair measure to help lenders estimate potential risks.
It is imperative that lenders use credit scores to decide whether to extend credit to someone as well as to determine the interest rate...