Credit Scores
Many lenders are now using computer-based systems to help them
determine whether they should offer credit to customers. These
systems analyze information in a credit report and assign a "score" to
that consumer. The score is based solely on the information in
a credit report and predicts the level of future credit risk.
A credit score is a snapshot of a credit report at a particular
point in time. The credit score may vary depending on the time
the credit report was viewed. The higher a score, the lower the
risk to lenders.
Credit scores help credit grantors decide whether a potential
borrower will be likely to pay what he or she owes and are based
on five kinds of credit information:
- Payment history
- Amount owed
- Length of credit history
- New credit
- Types of credit in use
Different lenders interpret credit scores differently. A score
that is acceptable to one credit grantor may not meet the requirements
of another. Since there is no one "score cutoff" used by all lenders,
it's hard to define what a good score is to a particular lender.
Under federal law, credit scores cannot be based on information
about a borrower's ethnic group, religion, gender, marital status,
or nationality.
The key to keeping your credit score in good shape is by using
credit responsibly. Pay bills on time and keep credit card balances
as low as possible. Don't open new credit accounts that you don't
need because your available credit on those accounts may limit
your ability to get the credit you need. Finally, check your credit
report every year to ensure it provides an accurate reflection
of your credit history.
The above information should be understood to be a general
discussion of the subject matter and DOES NOT constitute
a legal opinion about the situation. For further information
please consult a qualified attorney.
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