Credit scores: The higher, the better

The World Cup may be over, but it’s still important to know the score…your credit score, that is.

Ever wonder how a lender decides whether to grant you credit? For years, creditors have been using credit scoring systems to determine if you’d be a good risk for credit cards, auto loans, and mortgages. These days, other types of businesses — including auto and homeowners insurance companies and phone companies — are using credit scores to decide whether to issue you a policy or provide you with a service, and on what terms.

Some information about you and your credit experiences are collected from your credit report. That might include your bill-paying history, the number and type of accounts you have, whether you pay your bills by the date they’re due, collection actions, outstanding debt, and the age of your accounts. But scoring models also may be based on more than the information in your credit report. For example, when you apply for a mortgage loan, the system may consider the amount of your down payment, your total debt, and your income, among other factors.

Using a statistical program, creditors compare this information to the loan repayment history of people with similar profiles. For example, a credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. The total number of points — a credit score — helps predict how creditworthy you are: how likely it is that you will repay a loan and make the payments when they’re due. The higher your score, the more likely you are to get credit or insurance — or pay less for it.

To learn more, read How Credit Scores Affect the Price of Credit and Insurance.

Blog Topics: 
Money & Credit

Comments

It's just too bad the FTC has relinquished some of their responsibilities to the CFPB! What a waste that agency is! Just another money sucking albatross of the federal government!

Thanks for "great" advice... Good "guide" if the 3 Credit Bureaus are "accurate"...

Also companies use the credit score to deny
Regular jobs to people that were impacted by the
Down turn of the economy. That make sense
That people can not recuperate because
United State lost the common sense using credit
Reports incorrectly targeting with the wrong
Approach and not studying the facts about the economy

I have noticed that a certain major bank does a regular monthly credit check. This seems to count towards how many checks are done on your records and the more that are done the lower your score will be and the bank can charge you a higher interest. Seems the bases are being loaded against you by your own bank. this is why I no longer patronize this bank. This practice should be looked into by the FTC.

So how do the credit bureaus get info such as the purchase price of the home to determine down payment? And how are they getting income info because the lender DOES NOT provide either to the bureaus. How can they determine how much debt I can handle w/o knowing my income?

If you have not yet pass on the information that Credit Score are available free, please let the consumer know...........I came across the new article in the Sacramento Bee. Thank you

My apologies for this not being about credit scores specifically. After years of trying to obtain a credit card to help build my credit after a disastrous marriage that ruined it, I was finally granted a "pre-approved" chance from an online offer, from a major credit card company. Then I realized that they probably based that decision on erroneously assuming I was a male ... I have a male name. I had started getting dozens and dozens of credit card offers addressed to "Mr", even though I plainly stated over and over that I am female. Could I be mistaken? Sure.. but I have also gotten lots and lots of junk mail offers to all kinds of things addressed to "Mr". Ultimately, I am thankful they extended me the credit, because I went on to establish an excellent credit history that has lasted to this day.

Ah the credit scoring system .. Great article lead in and dubious content. Wasted time.

I NEED MY CREDIT SCORE TO BE HIGHER- I HAVE ONE CREDITER ON MY CREDIT REPORT. MY TRAN UNION IS 610 AND MY EQUIFAX IS 536 I AM TRY TO GET TOWNHOUSE IN SOUTHFIELD.

The information on the FTC's publication Building a Better Credit Report may help you. We wrote a blog about it.

It's my understanding I can get a free credit report but it does not include my credit score. Shouldn't I be able to know what potential creditors are basing their decision on. Often it is primarily the credit score.

Yes, many types of businesses — including auto and homeowners insurance companies and phone companies — are using credit scores to decide whether to issue you a policy or provide you with a service, and on what terms. Some of this information comes from your credit report. The Fair Credit Reporting Act (FCRA) gives you the right to get your credit report for free. And it also gives you the right to get your credit score from the national credit reporting companies. They are allowed to charge a reasonable fee for the score. When you buy your score, you often get information on how you can improve it.

So if a state governmental agency files in district court a fraudulent claim saying that you owe thousands of dollars in unpaid child support but actually you overpaid by thousands because the money was seized by Social Security. Does the judgment affect your ability to secure credit or other things like car insurance rates? Or ability to rent an apartment

I moved and filled out two applications for places to live. Those two applications took 19 points from my credit. How and when do I get them back?

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