Credit Score to Determine Risks

Using Credit Scores
to
Determine Risk,
Fair or Unjust?

LaShunta T. Little
University Composition and Communication II
Cynthia Greene

Topic: Using Credit Scores to measure Risk
I.                    Introduction
    A.      Why credit scores are a fair measure
 
II.                  What is a credit score?
A.      Definition of credit score
B.      How credit score is determine
C.      How to obtain your credit score?
 
 
III.                Why credit scores are fair measure
A.      Equal Credit Opportunity Act
B.      Credit Discrimination
 
IV.                History of credit
  A. Previous measures of credit risk
  B. Development of credit scores
          V.             Summary

For most people there will come a time in life when they will need credit. Whether they are purchasing a home or car, applying for a job, obtaining car insurance, or simply applying for a credit card, lenders look at an individual’s credit history to determine if they are likely to meet their obligations. Although, we all intend to meet our obligations in a timely manner there are some extenuating circumstances that can cause credit scores to be less than perfect. Although I do feel that a credit score is not a complete measure of a person’s character, I do think that using credit scores as a measure of credit risk is fair. This is the best way to determine a credit risk without discriminating against an individual because of their race, sex, age, gender, occupation, etc.
Credit scores are calculated from different data that is on your credit report. The data is grouped into five categories and each category has a percentage that reflects the importance in determining your score. Payment history 35%, amounts owed 30%, length of credit history 15%, new credit 10%, and types of credit used 10% all play a part in the formula that determines your score. As a consumer you have the right to know what is contained in your credit file. There are... [continues]

Read full essay