Credit Score Modelsscore factors and other useful information
Example your looking for a large loan and your history isn't that varied (a mix of types of loans) and that may be something your lender is interested in seeing in a potential borrower. Most lending institutions will use some sort of FICO score model, BUT that may not always be the case. Before you get too far into the process you may want to find out what credit score model they use and see how much information about that model you can get before it actually becomes an inquiry. Inquiries are just as they sound, inquiries into your credit. There are two types of inquiries. The first, is one you initiate that are involved in you applying for credit and are called hard inquiries. They usually result in shaving some points off your credit score. So doing a bit of homework on your part before involving yourself in the actual loan application process would be in order. One would additionally want to do their homework before applying for credit in light of inquiries and their impact to the credit score as you would want to keep the amount of inquiries to a minimum. Hard inquiries stay on the credit report for 2 years. Unless it is a large purchase that you are shopping for a flutter of new inquiries is generally looked at as someone in a desperate search for additional money. Not an attractive look to a lender. The second type of inquiry is called a soft inquiry. These are made by credit card companies and others looking to extend offers to you. Also those inquiries you make yourself (checking on your credit report) are also considered soft inquiries and these do not have an impact on your score. Once you know what credit score model your institution uses you may want to additionally know (if they care to discuss this) if you will be part of a score card or I should say WHAT score card you may be on. The score card is a grouping of similar acting consumers. An example would be those that have at least one or two 30 day late payments on their history. Most credit score models use several scorecards as it is looked at as making the process more predictable. To the one lending this is the most advantageous to them. In business there is always going to be losses somewhere and having a system in place to predict those losses is valuable. For the borrower what this means you will be grouped with those of a similar history and if you look better than others in that category your credit score could be higher. Overall the more of a loss you appear to possibly be, either the loan will be denied or the rate will be high to cover the possible losses incurred with a risky transaction! If you are part of a risky category and you rate higher than others in that category most likely you will not be denied the loan but you will most likely receive a higher percentage rate. On the other hand.... If your score and information match the favorable criteria level they have in place your interest rate will be low. Many times large banks will have their own credit scoring models with their own formula in place and use a third party scoring model with it again usually a FICO product. It is noted that these credit scoring models must not use biased information as part of the report such as: sex, race, religion or marital status. FICO products being the largest based (most products) and considered the standard and most predictive, many other credit scoring models try to copy these. The ones that mimic the FICO product (many call these FAKO scores) may still be a good judge of what your credit worthiness may be but they also are not usually what your lender is using. Some of these mimickers are Experian's plus score and scorex. While these are good way to get a general idea of where you stand if you've never looked at your score, if you are in the market for a large loan or mortgage you will want to get the "real thing" that your lender will be using. Knowing what the credit score model and score card you are on OR if you are on one of the proprietary credit score models of your lenders' is important to know before the loan process. In the case of a proprietary situation the loan officer you are dealing with will hopefully be able to explain that and what is important to that situation. Use that information to improve your score, or decide if indeed that is the institution you wish to work with. If upon receiving your credit score and a negative action does occur (a loan denial) the law requires the lender to state what reasons lead to the denial. There is a reason code that is standardized across all credit score models. Here is a partial listing of reason codes that may be used when you are denied credit or not given quite the loan you were looking for. CODE Explanation
02.............. Level of delinquency on accounts 03.............. Too few bank revolving accounts 04.............. Too many bank or national revolving accounts 05.............. Too many accounts with balances 06.............. Too many consumer finance company accounts 07.............. Account payment history is too new to rate 08.............. Too many inquiries over last 12 months 09.............. Too many accounts recently opened 10.............. Proportion of balances to credit limits is too high on revolving accounts 11.............. Amount owed on revolving account is too high 12.............. Length of time revolving accounts have been established 13.............. Time since delinquency is too recent or unknown 14.............. Length of time accounts have been established 15.............. Lack of recent bank revolving information 16.............. Lack of recent revolving account information 17.............. No recent non-mortgage balance information 18.............. Number of accounts with delinquency 19.............. Too few accounts currently paid as agreed 20.............. Length of time since derogatory public record is too short 21............... Amount past due on accounts 22............... Serious delinquency, derogatory public record or collection filed 23............... Number of bank or national revolving accounts with balances 24............... No recent revolving balances 28............... Number of established accounts 30............... Time since most recent account opening is too short 31...............Too few accounts with recent payment information 32............... Lack of recent installment loan information 33............... Proportion of loan balances to loan amounts is too high 34............... Amount owed on delinquent accounts 38............... Serious delinquency, and derogatory public record or collection filed 39............... Serious delinquency 40............... Derogatory public record or collection filed Using these reason codes you can correct the problems and hopefully wait for your credit score to go up before applying again. The following info I found online in a discussion board over a proprietary credit score model of a financial institution. It's important info that institution uses in addition to the fico score.
2) Length of time since 1st loan 3) How many loans or credit cards
return from credit score models to credit score repair
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