Related Credit Card Article

"How The Credit Score Process Works"

By admin | January 23rd, 2008 | Featured

Aside for your credit reference rating, the biggest single influencing factor on your credit rating will be your credit score. Now, unlike the credit reference agency rating, the way in which your credit score process works is clouded in mystery – as credit card companies won’t divulge this information to the public for fear of you learning how to beat the system!

In short, the credit score process is an attempt by credit card companies to look into a crystal ball and determine how you’ll behave, in repaying your debts on time, in the future. Learning from the previous experience of each card issuer, ordinarily this is done on the basis of a simply questionnaire that will ask you:

how long you have lived at your current address

If you answer that you have lived at 10 different addresses in the last 10 months, the card provider will likely see you as being high risk vis-à-vis running away. On the other hand , if you say you haven’t moved in the last 20 years, the issuer will likely see this as a positive, even if you have a bad credit reference.

how long have you banked with your current banker

Too short a time and you may not have had sufficient time to build up a credit history or you were such a bad credit risk your last bankers wanted rid of you. A long time, on the other hand, and you and your bank have stuck together through thick-and-thin and come through the other side; so maybe you are worth taking a risk on!

how long have you worked with your current employer

Again, if you have lots of previous work experience this is likely to tell the story that you are either incompetent or unsettled. However, having only been employed by one employer in the last 5 years shows stability – a good thing!

how old are you

Too young and you may be seen as a risk because you haven’t had the chance to build up a credit history. Too old and you are a risk because there may be less chance of you paying off the debt before you either retire, are made redundant, or die.

do you have a telephone

Having water and electricity available to you is a basic right – having a phone is not. So, if you have a phone then a phone company has done a credit check on you and has judged you worthy of taking a risk on.

Once you have completed the questionnaire, the credit card company will then ‘score’ the questionnaire to see how your credit score is determined. Do keep in mind that each card issuer has a different way of ‘weighting’ your answers, a fact they will never tell you, so just because you were turned down by one card issuer because of a bad credit score doesn’t necessarily mean you’ll be turned down by the next!

External Information

• MSN Money – 4 credit-scoring myths
  So if your mortgage broker gives you any of the following advice, take a tip from me: Find a new broker. Closing accounts can help your credit score
• MSN Money – Beef up your credit score in 5 steps
  After all, the better your credit, the lower the interest rates you can score on … This kind of advice, by the way, makes the folks in the credit scoring …
• Improve Your Credit Score from About.com
  Most increases to your credit scores take place over time and require an ongoing … Use these tips and techniques to start improving your credit scores today.

Tags: credit score

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