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Credit Scoring
Credit Scoring Author: Alexander Imagine that you are walking down the beach in your bathing suit. Too scary? Okay, imagine someone else and a crowd is watching. The crowd holds up signs that read 10 or 6.5, depending on how attractive the person in the bathing suit is to them. Crass? Unfair? Subjective? It’s unnerving enough just knowing you’re being judged on anything. But how about being judged on things you have little control over, or not even knowing the criteria upon which you are being judged? It’s like wearing a blue bikini and heels and not knowing that you should be wearing a red bikini and flip flops to score higher. This is not an exaggeration. For the longest time, no one knew the criteria for credit scoring. Only after enormous public and government pressure, consumers are now allowed to get their credit scores, although the formula used to calculate your score is still as mysterious as the recipe for love. Your credit score is derived from information accumulated in a credit bureau that issues your credit report. Your score is based on the number of credit accounts you have, your payment history, and your personal information, and is derived from a calculation so complex that there is no exact formula to print. But it is a statistical yardstick projecting whether or not you will default on future credit. Fair Isaac developed this statistical model (used by all three credit bureaus and most banking institutions), but will not reveal the exact recipe for the model. The company maintains that its model is a proprietary system, and keeping it a secret ensures its continued existence. If it gave away the product, how would Fair Isaac make money? What most people don’t realize is that this credit scoring model is a product sold to lending institutions and, of course, credit bureaus. This scoring model did not start out to be the industry standard, but since it was the most complete model available when the banking industry was interested in such information, it became an integral part of the credit granting process. The model took years to develop, and Fair Isaac has all kinds of empirical data to back up its accuracy. The lending industry considers this model to be fair and accurate. Since almost everyone uses it, it implies that everyone is measured by the same yardstick. Many (if not most) American and Canadian consumers are at the mercy of this statistical model. At the credit scoring conference held by the FTC in July 1999, Fair Isaac gave the opening presentation and talked about some of the things used in calculating consumer credit scores. What I found out was that a lot of what goes into the score calculation is beyond the control of the consumer. What Exactly Factors into Your Credit Score? Article Source: http://www.articlesbase.com/credit-articles/ About the Author:
 Credit, Loan, Loans, Debt, Mortgage, Credit-Check, Credit-Repair, Credit-Card, Credit-Report, Credit-Score, Bad-Credit, Credit-Counseling, Credit-Rating, Citi-Credit, Debt-Consolidation, Debt-Collection
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