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CREDIT
SCORES
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| What
is a credit score? |
| A credit
score is a number lenders
use to help them decide:
"If I give this person
a loan or credit card,
how likely is it I will
get paid back on time?"
Credit scores are also
called risk scores because
they help lenders predict
the risk that you will
not be able to repay the
debt as agreed. Scores
are generated by statistical
models using elements
from your credit scores,
however scores are not
stored as part of your
credit history. Rather,
scores are generated at
the time a lender requests
your credit report and
then included with the
report. |
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Credit
scores are fluid numbers
that change as the elements
in your credit report
change. For example,
payment updates or a
new account could cause
scores to fluctuate.
There are many different
credit scores used in
the financial service
industry. Scores may
be different from lender
to lender (or from car
loan to mortgage loan)
depending on the type
of credit scoring model
that was used.
Click here
to get immediate online
access to your credit
report and score. |
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| How
scores are calculated |
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| Developers
of credit scoring models
review a set of consumers
- often over a million.
The historical credit
profiles of the consumers
are examined to identify
common variables they
exhibited. The developers
then build statistical
models by selecting the
credit variables most
predictive of future behavior
and assigning appropriate
weights to each variable.
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| Models
for specific types of
loans, such as auto or
mortgage, more closely
consider consumer payment
statistics related to
these loans. Model builders
strive to identify the
best set of variables
from a consumer's past
credit history that most
effectively predict future
credit behavior. |
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| What's
in a credit score? |
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| The information
that impacts a credit
score varies depending
on the score being used.
Credit scores are affected
by elements in your credit
report, such as: |
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Number and severity of
late payments
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Type, number and age of
accounts
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Total debt
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Public records |
| Credit
scores do not consider
the following information:
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Your race, color, religion,
national origin, sex or
marital status. U.S. law
prohibits credit scoring
from considering these
facts, as well as any
receipt of public assistance,
or the exercise of any
consumer right under the
Consumer Credit Protection
Act. +
• Your
age.
• Your
salary, occupation, title,
employer, date employed
or employment history.
However, lenders may consider
this information in making
their approval decisions.
• Where you live.
• Certain types
of inquiries (requests
for your credit report).
The score does not count
"consumer disclosure
inquiry” requests
you have made for your
credit report in order
to check it. It also does
not count "promotional
inquiry" requests
made by lenders in order
to make a "pre-approved"
credit offer – or
"account review inquiry"
requests made by lenders
to review your account
with them. Finally, inquiries
for employment purposes
are not counted. |
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| History
of credit scores |
| Credit
scores came into wide
use in the 1980s. Long
before credit scores,
human judgment was the
sole factor in deciding
who received credit. Lenders
used their past experience
at observing consumer
credit behavior as the
basis for judging new
consumers. Not only was
this a slow process, but
it was also unreliable
because of human error.
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| Lenders
eventually began to standardize
how they made credit decisions
by using a point system
that scored the different
variables on a consumer's
credit report. This point
system helped to eliminate
much of the bias that
previously existed; however,
it was still tied to intuitive
measures of creditworthiness
and was not based on actual
consumer behavior. |
| Credit
granting took a huge leap
forward when statistical
models were built that
considered numerous variables
and combinations of variables.
These models were built
using payment information
from thousands of actual
consumers, which made
scores highly effective
in predicting consumer
credit behavior. When
combined with computer
applications, scoring
models made the credit
granting process extremely
fast, efficient and objective,
facilitating commerce
and helping consumers
quickly get the credit
they need. |
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This
information is provided as a
general educational tool and
Crown Jewelers makes no representation
as to accuracy or it's relevance
to your particular situation. |
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Trusted By Many
Crown Jewelers has been in business Since 1988, thousands of customers
have found Crown Jewelers to be their online jeweler of choice.
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