Credit Score Rating
What The Credit Bureaus Dont Want You To Know About!
Credit score rating system, tips and techniques for improving your credit score. Learn how to get your 3 credit scores to look good to any future lenders.
A credit rating is nothing more than an attempt to estimate your ability and willingness to repay a loan or debt, based on your credit history.
A credit history is a record indicating your trustworthiness and ability to repay a loan. Your loan activities are reported by your creditors to the credit bureaus, who then report your repayment history as delinquent (negative), regular (positive), or neutral (non-rated).
No credit bureau is allowed to evaluate your ability to repay a loan, creditors do have the privilege to rate you privately, but they are prevented from publishing their evaluations.
How to measure your credit score rating!
Your credit score is a composite of the information contained in your credit report plus the information provided directly to the lender.
Lenders use three types of information to determine your credit score rating:
- The lender’s personal evaluation of your potential. Objective criteria give the lending institution a pretty good idea of how you stack up as a credit risk. Borrowers, however, often seek amounts beyond their credit limit.
The lending institution leaves it up to the loan officer to pass judgment concerning the fine points of a loan decision, based on his or her professional interpretation of the objective data provided by the credit report scoring system and the 20 percent rule.
- Credit score rating system. Banks and similar large lending institutions, such as finance companies, savings and loan companies and credit unions, generally employ a scoring system used to rate your creditworthiness.
- Short-term-debt-to-income ratio using the 20 percent rule. Lenders will calculate what percentage of your annual income your short-term debt represents. (Long-term debt, like a mortgage, is not considered here.) You are generally allowed no more short-term debt than 15 to 20 percent of your total annual income.
As you look at your credit information, you will discover weak points that stand in need of improvement as well as positive points that can be emphasized.
In addition, you will know the amount of credit for which you qualify given your income, net worth, credit record and other relevant factors.
By knowing how you will be evaluated, you can begin now to substantially improve your credit score.
How reliable is the credit score rating system?
Credit scoring systems enable creditors to evaluate millions of applicants consistently and impartially on many different characteristics.
But to be statistically valid, credit scoring systems must be based on a big enough sample. Remember that these systems generally vary from creditor to creditor.
Although you may think such a system is arbitrary or impersonal, it can help make decisions faster, more accurately, and more impartially than individuals when it is properly designed.
And many creditors design their systems so that in marginal cases, applicants whose scores are not high enough to pass easily or are low enough to fail absolutely are referred to a credit manager who decides whether the company or lender will extend credit.
Much of the current anxiety over credit scores stems from the public's misunderstanding of the way in which these numbers are used and the factors that affect them. This may allow for discussion and negotiation between the credit manager and the consumer.
A better score means a better deal from landlords, lenders, insurers and other creditors. Use these tips to boost your credit score. Learn The Credit Rating System, The Credit Bureaus Don't Want You To Know About!
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Disclosure: I am an independent Credit Repair Cloud™ Affiliate, not an employee. I receive referral payments from Credit Repair Cloud. The opinions expressed here are my own and are not official statements of Credit Repair Cloud.