Credit Score

Some Intricacies Of The Credit Score

People who are planning to get a credit card should be familiar with its nuances. Not all credit card companies are the same, with differences in the amount that can be spent, different rules on cash advances, and others. In addition, they may also differ in their acceptance criteria, such as the person’s credit score. The credit score is essentially a rating of how trustworthy a person is when it comes to paying bills. This rating is arrived at by reviewing various documents, all of which reflect the person’s promptness in paying. They also include information on a person’s income, which also reflects the capacity to pay. There are some companies which even offer credit cards bad credit so that an individual is able to use it to improve his or her credit score. Unfortunately, this is not a quick process.

As stated above, there are numerous credit scores to be found in the market today. For instance, TransUnion and Equifax uses scores that are produced by FICO, while Experian uses another score, called the PLUS system. Other types of scores include the VantageScore, TransRisk and ScoreX. Each of these scores differs in their rating system and the points being assigned. Knowing the exact type of score being used by the company being applied for is usually not necessary (nor easy), but they do help in clarifying things in case of a rejection.

In the United Kingdom, statistical techniques are used to predict a person’s probable credit performance. Such techniques utilize specific models, the credit scorecards, in their attempt to predict a person’s behavior, whether or not they will default on their proposed credit position. In turn, these scorecards depend on multiple data from clients who have already defaulted, and compare these to clients who have not. The “factors” that made the clients default are then sought out, and compared to the present client’s application, to see if those factors are present. If they are, it does not mean that the client will default, but they are designated as risky in their credit score.

While some banks in the UK usually designate a person either as bad debt or no bad debt, other kinds of labels and predictions do exist. Some banks would even go as far as predicting the amount of bad debt that a person may incur. Understandably, this is much harder to predict, and thus, for the ordinary consumer, it is almost impossible to know whether or not they have been accepted beforehand. This is compounded by the fact that lenders do not usually tell the minimum credit score needed to be accepted for their loans. Whether they are high interest or cheap loans. Needless to say, when an applicant is rejected, there are also no reasons provided as to why.

In the UK, the Financial Services Authority is in charge of regulating the credit score system, and any potential changes are discussed by bank experts and government agencies twice a year in Edinburgh, at the Credit Research Centre Credit Scoring Conference.

© 2012 Cheap Loans – Compare The Cheapest Loans UK

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.