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Credit
Scoring: The Upside for Consumers
Understanding what credit scoring
is and what your individual score
means can help you improve your overall
credit rating. But credit scoring
is also a two-way street; scoring
can help companies better understand
and serve you. In today's harried
business environment, credit scoring
is a unique tool allowing a creditor,
for example, the ability to quickly
and accurately evaluate their potential
customers.
So what's the big deal? Well, credit
scoring offers the following benefits:
- Fast Credit Approval
Coupled with fast computer systems,
each application for new credit
can be scored and evaluated in
seconds. For example, credit scoring
has allowed companies to offer
"instant credit," which
was unheard of in years past
- Accuracy
Factors involved in any credit
score are considered using a uniform
process, eliminating human error
and bias. Your race, age and gender
don't impact your credit score,
just your credit history.
- Consistency
Since credit scoring analyzes
each customer's credit history
using the same statistical formula,
there is a consistency in the
way a company evaluates customers
across the country.
- Reduced Bad Debt Losses
Credit scoring allows companies
to more accurately predict which
new customers will end up being
high-risk, lowering the overall
cost of doing business.
- Reduced Operating Costs
Faster, cheaper and better credit
scoring means lower costs for
businesses and better rates for
you, the consumer.
You can also put your credit score
to work for you on a personal level.
Your personalized PLUS Score comes
with an analysis that shows you the
factors that are impacting your rating.
You can use the personalized tips
to help improve your credit rating
and make sure you're putting your
best foot forward with lenders-and
getting the best deal for which you
qualify.
Some general tips to improve your
score are:
- Pay Your Bills on Time
Payment history is one of the
single most important factors
in determining your score. Getting
in the habit of making on-time
payments can be a powerful tool
to increasing your credit rating.
- Pay Down Your Debts
Lenders like to see a cushion
between your credit limits and
your outstanding debt. The more
you pay off, the bigger that space
and the better your score.
- Avoid "Bad Credit"
Behavior
Missing some credit card payments
might not seem like a big deal,
but behavior like this can significantly
impact your score.
- Apply for New Credit
Sparingly
Shopping around for credit can
have an adverse affect on your
score, especially if you have
a history of applying for multiple
cards over a short period of time.
Each time you apply for new credit
and that company checks your report,
an inquiry is added to your credit
file. Too many inquiries can be
seen as an indication that you
have had trouble getting new credit
or could be overextending yourself.
- Check Your Credit Score
Regularly
Look for mistakes on your report
and plan ways you can improve
your overall score.
Credit scoring is a powerful tool
for both businesses and consumers.
Better credit access at a cheaper
cost to you is what it's all about. |
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