Credit Score Rating

What's a Good Credit Rating Score

What's your credit score rating

Lenders use an automated "credit rating score" system to help them make decisions on loan applications. But you can improve your score and your chances of getting a good loan.

One way creditors can quickly review thousands of loan applications is by using automated "credit scoring." Even if you do not have any plans to apply for a loan soon, we think you should know about credit scoring. Why?

Because the next time you do need a mortgage, car loan, credit card or other type of loan, your score could affect the interest rate you are charged. It could determine the repayment terms and other conditions of the loan. Your rating could even play a role in whether you are approved for the loan. To be on the winning side of this scoring system, it helps to know the basics.

What Is Credit Scoring?

Credit scoring is a system that's designed to improve a lender's ability to evaluate the likelihood that you will repay a loan. It's based in part on credit scoring "models," which are computerized systems that look at a variety of factors relating to many consumers personal information and credit histories, such as age, income and level of outstanding debt.

Scoring systems collect this data to try to predict a consumer's ability and willingness to pay future debts. Scoring systems usually produce a numerical "credit rating score". Lenders use these tools to help decide if a loan should be made and to set repayment terms.

If a Score Is Low

A score in the lower ranges will not automatically disqualify you from getting a loan. But it may prompt the creditor to review your history more carefully before making a decision whether to approve or deny your loan. A low credit score will likely result in a higher rate of interest or more strict repayment terms than those offered to others.

If a lender's system is properly designed, tested and monitored, it should give a faster and more impartial evaluation of creditworthiness than a loan officer could have made on his or her own.

A credit score, however, may not be the best way to try to predict whether someone will repay a loan in a timely manner. Among the reasons: the information that was reported to the company that developed the model may be inaccurate or the statistical assumptions behind the program may not be sound.

Credit scores are usually not released to consumers. But under the Fair Credit Reporting Act, if you are turned down for a loan because of information in your report, you have a right to get a free copy of that report and to have any mistakes corrected. Catching and correcting mistakes may have a positive effect on your rating and would likely improve the chances that your application will be approved.

Improving Your Score

Just like building your own history takes time, it also takes time to improve your score...and your chances of getting a loan at favorable terms. According to a consumer brochure published by the Federal Trade Commission, you can boost a low score by "paying down outstanding balances, concentrating on paying your bills on time, and not taking on new debt."

We also believe it's a good idea to review your file periodically, to make sure it accurately reflects your history. That way you can provide missing details or correct inaccurate information before it gets factored into your score and you're in a hurry to get a loan.

Order a 3-BUREAU CREDIT REPORT from CreditReporting.com. SEE what's in your report TODAY to insure 100% accuracy TOMORROW!