Credit Scoring And What It Means To You

How do the Credit Agencies determine Credit Scoring?

Credit Scoring is a methodology that lenders use in evaluating the risk of making a loan to consumers.

Consumers who are always late paying a credit card or continually default on auto loans, may have a less than perfect credit report. Late or nonpayments show up as delinquent payments on a consumer's credit report in the payment history section. When consumers apply for credit cards and loans and the prospective creditor reviews their credit report, this activity shows up as a “hard hit” inquiry on their credit report.  If a consumer has too many inquiries on their credit report it can negatively affect their credit score. The debt-to-income ratio is also another factor. The debt-to-income ratio shows how much debt the consumer has and the available income they have available to pay the debt. A high debt-to-income ratio is an indicator that the consumer may not be able to handle any more debt. Payment history, hard hit inquiries and debt-to-income ratio are a few of the factors credit agencies use in Credit Scoring.
 
What is the Credit Scoring system?

Credit Scores fall between 500 and 850. Here are the credit scoring ratings that consumers often fall into based on the information in their credit report.

•  500 to 559: This is a low rating. Credit Card companies and banks may find consumers who fall into this category as too much of risk for a loan. If consumers with a credit score in this range are approved for a loan, the terms are usually very strict and the interest rates may be very high.
•  560 to 619: The chances that the consumer will receive approval for a loan are still pretty low in this range. The consumer  may find that their interest rates are still very high and the terms very strict.
•  620 to 659: Consumers with a credit scoring rating in this range may have a better chance of  getting a loan approval. However, the interest rates may not be the best the market has to offer.
•  660 to 669: A consumer with a credit score in this range may find less problems obtaining low interest financing or qualifying for most loans.
•  700 to 759: Not the best credit score, but consumers with a credit scoring rating in this range can generally qualify for low interest loans rates and better terms.
•  760 to 850: Consumers in this range can usually obtain the best interest rates the market has to offer. Consumers with credit scoring ratings above 800 are usually determined to have flawless credit.

You can find out more about credit scoring by visiting other areas of our ConsumerHelpUnit website. Contact information is available on every page throughout our website in the event you wish to contact one of our representatives.

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