• How Does a Creditor Determine Whether to Grant You Credit?


    Credit 101

    How does a creditor determine whether to grant you credit? For many years, creditors have been using credit scores and credit scoring systems to determine if you'd be a good risk for a loan or credit card. More recently, credit scores have been used to help determine what rates you pay for insurance. What is a credit score and why is it so important?

    What is a credit score?

    Credit scores and credit scoring systems are used to help creditors evaluate the risks associated with granting loans and extending credit. Everyone has a credit score. Information about you and how you have handled your credit is captured onto a credit report. How you have paid your bills, the number and type of account you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a system, creditors are able to compare all of this data against the credit performance of other consumers with similar profiles. A credit scoring system assigns a point value for each factor and helps predict who is most likely to repay a debt. The total number of points is combined to form your credit score. Your credit score predicts your creditworthiness or the probability that you will repay a loan / credit in a timely fashion. The higher the credit score, the lower the risk associated with extending loans and credit. The lower the credit score, the higher the risk associates with extending loans and credit.

    Because credit reports and credit scores are so important in today financial world, it is imperative that you monitor these closely. I recommend that you contact the three major credit bureaus to obtain a copy of your credit report at a minimum of every 90 days. To obtain a copy of your credit report contact:

    Equifax: (800) 685-1111

    Experian (formerly TRW): (888) EXPERIAN (397-3742)

    Trans Union: (800) 916-8800

    Just as there are three major credit bureaus, there are three separate credit scores provided by each of them. All of these scores are developed utilizing a method Fair Issac came up with to ensure that an accurate picture of our credit risk is generated. Each score may vary slightly, as the information contain on each credit report from each of the three major credit bureaus is different.

    When lenders and financial institutions evaluate your credit report and credit scores, they use information provided by these three major credit bureaus. It is imperative that you monitor these credit reports, as your financial future is contain on those pages. There are rights afford to each of us as consumers by law, which allow us to ensure that the information contained on these reports are accurate With the Federal Bureau of Investigation naming "IDENTITY THEFT" as the number one crime, it is imperative to maintain your credit profile in today's world. Don't let a theif steal you and your families financial futures!

    For more information regarding your credit scores, credit reports or debt options currently available to you, please contact Gateway Credit Connection or visit us online at www. creditmonkey. com.

    Michael Goff is the Co-Founder of Gateway Credit Connection, helping empower consumers to take control of their personal and business finances.

    Gateway Credit Connection
    15770 Dallas Parkway
    Suite 1100
    Dallas, TX 75248


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