Mortgage Forum Live

Credit Report Companies: Foes Or Friends?

By December 7, 2008

Without a good score, you will be unable to get loans or credit. Unfortunately, many people don’t understand the importance of a good credit score. Consequently, they do not follow the basic rules needed to obtain and maintain a good score. This article has covered several aspects of credit scoring, and explained how the major credit report companies calculate the 3 credit score reports.

Credit score determination varies from region to region. For example, British credit report companies use a maximum-entropy classifier or logistic regression to determine your credit score. That method evaluates the likelihood of your defaulting on your loan’s repayment based on regression analysis of certain variables. Those variables include your recent tax statements, history of repaying prior loans, and amount of annual income.

Financial institutions use credit scores when evaluating the risk of lending money to individuals. If you have a low score you are likely to be rejected immediately and without any further consideration to your situation. Your only option would be to apply to a lender that specializes in higher risk or sub-prime loans which usually come with much higher interest rates.

At least once a year every American can review his or her credit score free of charge. All you have to do is just log on to the website which publishes annual credit reports. The report is a result of findings from three major credit report companies. If you need to, you can also request a hard copy for your records from these institutions.

If you have analyzed your situation it becomes easier to plan a route to improve credit rating. To be able to determine what you spend your money on you need to keep a record of expenses and income. This should become a habit and is easiest done by listing expenses and expenditure in two columns. You should always ensure that a part of your income is used to repay loans to ensure that you build a good credit report.

Keep in mind that credit report companies don’t love when you pay off a loan ahead of time. You are better served to make the payments originally set up at the time of the disbursement. The agreed upon payments should be paid on time. This proves to the lender that you are responsible and trustworthy. Without a doubt, such responsible behavior ensures that you can receive another loan.

It is imperative to have a good credit score in order to receive a loan. Particular attention is placed on the manner in which the three credit report companies determine the 3 credit score reports. The method of arriving at credit scored differs according to the region. In this method, the firm evaluates the probability of you defaulting on loan repayment based on regression analysis of selected variables. The reports maybe requested as an on-line document or as a hard document. Making the decision to improve credit rating is less difficult after you determine what your current credit rating is.

- Daniel Lesser

read user's comments (1)