Credit Report Scores
Credit reports and credit scoring is an impersonal act when it determines your credit worthiness.
At first a credit score was developed as a guide to help point our certain deficiencies with a persons loan or credit card application. At first banks and credit card companies relied on their own professional decision makers to approve or disapprove your application. I remember when loan officers used to go into the managers office and discuss your loan. Basically they would just ask each other, what they thought about you and your situation. They relied on human intuition and there own gut feelings.
Along came computers and a credit scoring system that replaced a persons personalized decision. This system uses technology that assigns a numbered valuation of your credit worthiness based on what someone else reports. This then bases a number from your past performance and assigns a number as a lending risk. These are all based on your income, how long you have lived in your home and employment history.
This is a good system for lenders but it’s a poor way to evaluate a person financial situation. A computer cannot report or consider any extenuating circumstances. This is also one of the reasons billsaddup.com only recommends you use your local bank to apply for a mortgage or to refinance.
One example is if the company you work for has a fire and you are laid off for a short term. It would be hard to make all your payments on time until you got back to work. If you miss a payment or are late, it will only report that with no other reason. The computer would score you the same as if you always had late payments or and your credit score would go down. This is a good example of why you should always strive to have at least a minimum of 6 months income in the bank to hole you over until you are back on your feet.
True and false questions about your credit report
False - credit bureaus do not determine your credit rating, they only record what is reported to them
True - If you apply for too many credit cards or loans. This is recorded in your report every time you apply. Do this too many times in a short time frame and you file will be flagged.
False - Your credit rating cannot be changed is false you can always have incorrect information changed. Sometimes not easily but it can be done.
All creditors report to the credit agencies is false, they are not required to do so.
Bankruptcy only appears on your file for six years is false, it will be there for at least 7 or more and if you file twice it will be there for at least 14 years.
If you are near your credit spending limit this could look bad and affect your credit history or rating. This is true.
What can you do?
Get a copy of your free credit report or spend a couple of dollars and signup with a credit reporting service and get a detailed report.