I recently posted information regarding credit
scores and the importance of this number as the determining
factor of your credit worthiness. How is it possible that
three little numbers can determine so much about you…whether or not
you are approved for a credit card, whether or not you can buy a
car, a home or even rent an apartment. In fact, most
consumers are so concerned with their score that a recent consumer
report indicated that consumers spend close to $1 billion a year
just to obtain copies of their score along with their credit
reports. However, these reports that consumers are
spending tons of money purchasing are not actually the same score
that lenders receive and use to make major decisions about you.
Research has shown that creditors are not using the credit
scores you are familiar with, like FICO, but in fact are using
their own methods of scoring based on the information contained in
your credit report. While there is nothing you can do to get
your hands on these “secret scores” you can protect yourself and
better your chances of approval by knowing what each creditor is
looking for prior to submitting your application. For example
there are different scores for each of your purchasing needs, such
as automotive scores, revenue scores, deposit account scores,
bankruptcy scores and transaction scores which solely monitor your
credit card activity.
While these types of scores are not accessible to the average
consumer, you may be able to get your hands on them when and if you
are denied credit. When you are denied credit, creditors in
compliance with the requirement of the
Fair Credit Reporting Act (“FCRA”) must provide you with an
adverse action letter notifying you of the denial, which report was
used in their decision and notifying you of your right to dispute
in the event any of the information reported was inaccurate.
When receiving an adverse action letter, make sure to directly ask
the lender if the decision was based on any credit scoring model
and if so, ask to see a copy of your score or at the very least ask
how the score was calculated. Bottom line is these scores for
the time being will more than likely continue to remain
secret. To keep these scores from affecting your ability to
obtain credit, try to make a concerted effort to timely pay your
bills, try not to spend more than 2/3 of your revolving credit line
and keep new credit accounts to a necessary minimum.
If you are having problems with your credit report or credit
score and need additional information contact SmithMarco P.C. for a free
case review with a licensed attorney.