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Summary
When
a customer fills out an application for credit
(i.e. a loan, mortgage, credit card, etc..)
from a bank, store or credit card company,
their information is forwarded to a credit
bureau (of which Equifax, Experian and
TransUnion are the 3
major credit bureaus). The credit bureau
matches the name, address and other identifying
information on the credit applicant with information
retained by the bureau in its files. That's
why it's very important for creditors, lenders
and others to provide accurate data to credit
bureaus
All 3 of the major credit bureaus issue credit
scores. Credit scoring is the process of using
a proprietary mathematical algorithm to create
a numerical value that describes an applicants
overall creditworthiness. Scores, frequently
based on numbers (ranging from 300-850 for
consumers in the United States), statistically
analyze a credit history, in comparison to
other debtors, and gauge the magnitude of
financial risk. Since lending money to a person
or company is a risk, credit scoring offers
a standardized way for lenders to assess that
risk rapidly. All credit bureaus also offer
credit scoring as a supplemental service.
Credit scores assess the likelihood that a
borrower will repay a loan or other credit
obligation. The higher the score, the better
the credit history and the higher the probability
that the loan will be repaid on time. When
creditors report an excessive number of late
payments, or trouble with collecting payments,
the score suffers. Similarly, when adverse
judgments and collection agency activity are
reported, the score decreases even more. Repeated
delinquencies or public record entries can
lower the score and trigger what is called
a negative credit rating or adverse credit
history.
Monitoring your credit report is important
to help ensure your credit history is accurate
and is also value to prevent identifty theft!
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