WHAT IS A CREDIT SCORE

A credit score is a number lenders use to help them decide: "If I give this person a loan or credit card, will I get paid back on time?" It is one of several pieces of information that auto, mortgage, credit card and other lenders use when evaluating your application for credit.

There are different types of credit scores. Credit bureau scores are based solely on information in consumer credit reports. Other types of scores may also include information from credit application or bank files. A credit report is calculated by a computer in your bank or at one of the national credit bureaus when a lender requests it.

A score is a snapshot of your credit risk picture at a particular point in time. It changes as new information is added to your credit bureau report or bank file. Only information that is proven to be predictive of future credit performance is used,

WHY DO LENDERS USE CREDIT SCORES?

Credit scores give lenders a fast objective measurement of an applicant's credit risk. Before the use of scoring, the credit granting process was usually slowed, inconsistent and often unfairly biased.

Lenders can use scores to speed up loan approvals to borrowers who score above a certain threshold. Borrowers with scores just at the threshold or below may be asked to submit additional information or may qualify for different terms. Many lenders offer a choice of credit products geared to different risk levels. Most have their own separate guidelines, so if one lender turns you down, another may approve your loan.

WHAT IS A GOOD SCORE TO GET?

A “good" score is a number that matches the level of risk a lender is willing to accept for a particular loan or credit card. For example, a score of 750 may qualify you for a gold credit card, whereas a score of 675 may indicate you're a better match for a standard card. Scoring systems have varying numeric scales. A score of 875 could indicate high risk in one system and low risk in another. It’s hard to say what's a good score to get-- it varies from lender to lender.

HOW CAN I FIND OUT MY SCORE?

Some lenders may tell you your score. However, a score in isolation does not provide much information. Scores are dynamic and change when new information is added to the credit file. Also, lenders use different types of scores with varying numeric scales. In addition, other factors, like application information, Impact lenders' credit decisions. Remember, what's considered an acceptable score varies from lender to lender depending on the loan or credit card applied for.

HOW CAN I IMPROVE MY CREDIT SCORE?

Scores reflect credit payment patterns over time with more emphasis on recent information.

To improve a score:

Pay your bills on time. Delinquent payments and collections can have a major negative impact on a score.
Keep balances low on unsecured revolving debt like credit cards. High outstanding debt can affect a score.
Apply for and open new credit accounts only as needed.

Your credit snapshot will improve over time if you make changes now in the way you handle credit. Make sure the information in your credit report is correct, too. If you find errors, contact the credit bureau and your lender.

WHAT IF I'M TURNED DOWN FOR CREDIT?

While lenders are not required to disclose a score, if you have been turned down for credit the Equal Credit Opportunity Act (ECOA) requires that you be given the reasons why within 30 days. Possible reasons a score is too low might include recent late payments or too much outstanding credit.

If your credit application was turned down, or you didn't qualify for the interest rate you wanted, ask your lender how you can improve your credit picture.

Also if you have been turned down, you are entitled to a free copy of your credit bureau report within 60 days. However, if you try to contact them via phone for a copy, chances are you will spend a lot of time doing so. The credit bureau makes it very difficult to actually speak with someone via phone. It's better to order it online for a nominal fee. Not only will you get a copy instantly, but you can also dispute inaccurate information online immediately as well.

http://www.creditexpert.com (Experian)
http://www.econsumer.equifax.com (Equifax)
http://www.truecredit.com (TransUnion)

WHAT IF THE INFORMATION IN MY CREDIT REPORT IS WRONG?

You should make sure the information in your credit report is correct. Review your credit report from each credit bureau at least once a year and especially before making a large purchase, like a house or car.

Call these numbers to Dispute in accurate information on your Credit reports. They are direct lines to the Dispute Dept. and may help you circumvent the endless maze of voice mail options.

Equifax: (800) 685-1111
TransUnion: (800) 916-8800
Experian (formerly TRW): (800) 509-8495

If you find an error, the bureau must investigate and respond to you within 30 days. If you are in the process of applying for a loan, immediately notify your lender of any incorrect information in your report. Small errors may have little or no effect on your score. If there are significant errors, however, the lender may disregard the score.

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