Robert Solomon Hillman
COM / 156
University Composition and Communication II
Ms Keisa Williams
05/05/2011
Lenders for the longest time have been using people’s credit scores, and the reports generated from their score to find out whether to lend them money. The lenders use peoples credit scores to see who qualifies for a loan, and at what interest rate that loan will be at. They also determine what the customer’s credit limit could potentially be. The credit scoring system has for a long time proven its self to be most effective in helping lenders see if people will be potential customers by checking their credit history. Lenders are able to get the customers information on things such as late payments, tax liens, and even on things like bankruptcies. In 1989 FICO came out with a scoring system that was able to give lenders a shortcut in determining a customer’s credit worthiness. The three major credit unions using this credit scoring system are Experian, TransUnion, and Equifax. These three monsters of the credit world are able to calculate a FICO score from data that they get from credit card companies and banks. The FICO system was designed to calculate the customer’s probability of repayment on their open line of credit. Potential customers could have a credit score that ranges from 300 all the way up to 850. This score for the most part is based on a few things. The main one being their payment history, in which consist of 35% of that score. The second most important one would be the debt that they have ranging in at 30% of the score. Then the lenders look at things like length of a person’s credit history at 15%, how many debt sources they have at 10%, and if they have had any recent credit activity at 10% as well. So if a potential customer comes in with a credit score of 700 to 800, their chances of getting a loan with a good interest rate are going to be a lot better than say if someone was to come in with a score of 500. Lenders would look at a... [continues]
COM / 156
University Composition and Communication II
Ms Keisa Williams
05/05/2011
Lenders for the longest time have been using people’s credit scores, and the reports generated from their score to find out whether to lend them money. The lenders use peoples credit scores to see who qualifies for a loan, and at what interest rate that loan will be at. They also determine what the customer’s credit limit could potentially be. The credit scoring system has for a long time proven its self to be most effective in helping lenders see if people will be potential customers by checking their credit history. Lenders are able to get the customers information on things such as late payments, tax liens, and even on things like bankruptcies. In 1989 FICO came out with a scoring system that was able to give lenders a shortcut in determining a customer’s credit worthiness. The three major credit unions using this credit scoring system are Experian, TransUnion, and Equifax. These three monsters of the credit world are able to calculate a FICO score from data that they get from credit card companies and banks. The FICO system was designed to calculate the customer’s probability of repayment on their open line of credit. Potential customers could have a credit score that ranges from 300 all the way up to 850. This score for the most part is based on a few things. The main one being their payment history, in which consist of 35% of that score. The second most important one would be the debt that they have ranging in at 30% of the score. Then the lenders look at things like length of a person’s credit history at 15%, how many debt sources they have at 10%, and if they have had any recent credit activity at 10% as well. So if a potential customer comes in with a credit score of 700 to 800, their chances of getting a loan with a good interest rate are going to be a lot better than say if someone was to come in with a score of 500. Lenders would look at a... [continues]
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