Some people don’t have that “right score” so they are denied rights that they normally should have, like getting a loan approved or a new credit card.
“Scores” were first started by local department stores and financial institutions who would share their information about their applicants to see if potential new customers were credit worthy. Later, this practice morphed into what we call the “Bureaus” or Credit Reporting Agencies.
Do you remember the Welcome Wagon ladies? They weren’t really there to welcome you to the neighborhood. They worked for the local credit bureaus and were told to go and get what ever information they could on the new family that just moved into town. The Ladies would come with baked cookies to make it seem friendly, and innocuous.
With some of that gathered information, it wasn’t uncommon to discriminate against people with what is known as “red lining”. Red lining is drawing a line around a neighborhood of people and denying them certain services or rights for unspecified reasons.
We now have many laws in place to protect the public from this practice. That doesn’t mean that the Welcome Wagon Ladies don’t still come to see you…it’s just that “red lining” is prohibited for any reason. Still, the information that they gather, along with the information on your credit application, are used to determine what kind of risk you are. Your history in obtaining credit, and how well and faithfully you repaid that loan, make all the difference in how you will be treated when you try to obtain new credit.
That’s why it is so important for you to KNOW what your credit report says about you. Once you have pulled a copy (available for free from www.annuacreditreport.com) and you notice that there is inaccurate, misleading, old, or unverifiable information…it is important to get that corrected as soon as possible. In this way, applying for new credit will be much faster and easier, and you will gain the peace of mind that comes with KNOWING that you can qualify.
Another important issue is your score. The Fair Isaac Corporation (FICO) model is still the accepted version of credit scoring with most lenders in the United States. Your FICO score is going to be different at each of the Bureaus: Experian, TransUnion, and Equifax. There are a myriad of reasons why that is true, but the most important is that until you get a copy of your report, you don’t know which of you creditors is reporting to which bureau. Some report to all three – some report to two – and some only one. This skews your numbers, and is the reason why most lenders take an average of all three to determine the level at which they will grant you credit.
What do I mean by levels? FICO says that an excellent score is between 700-850. If you fall within these boundaries, you can usually get the very best interest rates available for car loans, home loans, and unsecured credit. The next level is 680-699 which is called Good. You will pay a slightly higher rate in this category. Fair falls between 620-679. If you fall into the fair category, you will have a little more trouble getting credit and you will pay higher interest rates. Below 620, the categories are Poor and Bad, and at these levels, credit is nearly always denied to you.
Knowing what your report says, and taking action to have it accurately reflect what you know to be the truth about your history, can make all the difference in obtaining any kind of credit. To learn more about how I can help you, please contact me. Donna Perkins, President