Credit > Scoring (1) Creditors often rely on credit scores to help them determine the credit worthiness or risk of lending to consumers. The information on a consumers credit file may be used to compile a score that will be the basis of determining whether a consumer should be granted a loan or a line of credit. If a decision is made to grant a loan or a line of credit, the credit score may also be used to determine the interest rate that will be applied to the loan or line of credit. Generally speaking, the riskier it is to lend to a consumer, the lower the chances are that the consumer will be approved and, if approved, the greater the likelihood that the consumer will pay higher interest rates. Many lenders have “in house” scoring systems but they also rely on scoring models that are provided by credit reporting bureaus. Different credit bureaus use different credit scoring models, but the standards of determining a consumers credit worthiness are consistent from model to model and they are based on the Fair Isaac Company’s scoring criteria. The scoring system that is used may be termed a “Beacon,” “Empirica,” or a “FICO” score depending on what credit bureau is supplying the score. Some lenders rely upon “merged” credit reports that provide a compilation of consumer account and credit scoring information from more than one reporting bureau. |
|
|