| |
| |
|
|
Credit Information |
|
New Credit Scoring Model Could Help Millions
Mark and Beth, a young married couple in their twenties, established a goal to buy a home within the first three years of their marriage before starting a family. They budgeted and used their money wisely in order to save for the down payment. Whenever they purchased something they always paid cash - no credit cards for them. Why waste money by paying interest to a credit card company? Within two years they'd reached their savings goal and began house hunting. They found their "American Dream" home in a new community with lots of amenities that seemed perfect for their soon-to-be family. They were elated that their years of saving were about to finally payoff. But, they ran into a big problem when they went shopping for a mortgage. Even though they had enough income to make mortgage payments and enough money saved to afford the down payment, they had no credit history. Lenders had no FICO score to evaluate their creditworthiness in order to offer them a loan. Fair Isaacs Co. established a credit scoring system in the 1980's and since then FICO scores have been used to determine if someone will qualify for a mortgage and the interest rate they would pay. Over 50 million U.S. adults fall into the same category - they have either too little credit history or no credit history at all. But now thanks to a new FICO formula, called FICO Expansion Score, lenders will now have opportunities to extend credit to consumers based on non-traditional credit data that are excluded from credit bureau reports. FICO Expansion will consider a wide range of financial transactions including payment activities such as rental payments, deposit accounts, payday loans, book or CD club payment plans, and retail lay-away plans. Who stands to benefit from this new scoring model? Anyone who makes little use of banks, credit cards, or checking accounts. The "credit underserved" claims Fair Isaac Co, which includes young adults, low-income consumers, widows or divorcees, and immigrants. And while those in the credit card and mortgage industry see this new scoring model as a potential benefit, those in the credit counseling sector foresee potential problems. Fair Isaac CEO Tom Grudnowski is excited about his company's new credit-scoring resource. "This extension of the FICO score gives lenders and other businesses another powerful tool ..., while expanding service options for consumers who have missed out on opportunities simply because they lack a traditional credit history." The opposition, namely debt and credit counselors, see both the good and the bad. Some consumers will benefit by qualifying for less costly credit arrangements. However, others could fall prey to becoming overextended unless they also receive some basic credit and debt education. Tom Hicks, a credit counselor in Chicago, worries that "with the average American household owing $8,000.00 in credit debt, this could open the door to others finding themselves unable to handle credit properly. Ultimately the burden lies with the consumer," he says. Fair Isaac Co. estimates that at least half of those without traditional credit profiles will benefit from this new scoring method. About The Author © 2004, http://www.yourfreecreditreportnow.com Author: James H. Dimmitt Discover more money-saving tips and articles in our free weekly ezine, "To Your Credit" by visiting http://tinyurl.com/bgo9. Subscribe today and receive FREE bonuses!
MORE RESOURCES:
Discover Financial Services F1Q10 (Qtr End 02/28/10) Earnings Call Transcript - Seeking Alpha (blog)
Google News |
|
|
|
RELATED ARTICLES
Credit Reports: Find out why you have been refused Credit. You may already have 2 or more credit cards in your purse or wallet and you have just applied for a third and been declined. This can be very frustrating considering you pay off your other credit cards regularly and you are continually having your credit limit raised. Credit Cards: What is the Universal Default Clause? Most people who carry major credit cards are well aware that the interest rates associated with them tend to be higher than for other types of lending, such as home or auto loans. Anyone who has paid their credit card bill late more than once or twice is also aware that doing so may cause the interest rate on their card to go up - sometimes by quite a lot. 10 Simple Steps to Manage Your Credit By far the greatest invention the banks have ever come up with came out in the 20th century. Also the new field of Credit Management was born with the invention of the credit card. Balance Transfers Introduction Credit card balance transfer involves using a credit card to pay off the amount outstanding on one or more credit/store cards. The total debt then moves to one card. Grants, Loans, Free Credit Cards And Credit Repair: The Whole Truth And Nothing But The Truth You got creditors calling you everyday. You could lose the car or house. Student Credit Cards 101 If you're a college student, you probably already have a credit card. If not, you may have plans to get one or more soon. Harassment of People in Debt by Creditors HarassmentHarassment of people in debt by creditors or their agents is a criminal offence under the Administration of Justice Act 1970. It is often difficult to know what to do when you feel a creditor is not dealing with your account fairly. Finding Reputable Credit Card Companies You're interested in getting the best credit cards for your family's needs, but you don't want to be cheated. Or you're interested in small business credit cards, but you've heard that some of them aren't terribly secure. Credit Cards, Merchant Accounts, and Your Bottomline Q: I'm opening a gift shop and want to be able to accept credit cards. I talked to the branch manager at my bank, but he didn't seem to know much about how it all worked. Compare Credit Card Offers and Reward Yourself Here's a simple system on how to pay zero interest and get tons of free stuff. Almost everyone uses credit cards. Your Credit Rating and How To Check It There is a lot of confusion surrounding UK credit ratings, credit scores, credit blacklists, credit reports, and credit files. This guide to your credit rating aims to give you the facts you need. Understanding Your Rights Under The Equal Credit Opportunity Act It wasn't all that long ago that lenders blatantly discriminated when it came to approving credit for women and minority groups. Women were actually asked personal and demeaning questions like, how many children do you plan to have in the future or are you on birth control?Despite the fact that they were entering the workforce in record numbers, single women were often required to get a cosigner or denied credit altogether. Free Credit Reports Now Available From the FTC The Federal Trade Commission (FTC) has set up a new website (www.AnnualCreditReport. Minimize your Risk for Identity Theft Identity theft is the fastest growing crime in America. According to the Federal Trade Commission, the number of identity theft incidents reached 9. The Ghost of Expected Surprises Here, Cratchet, what do you think you're doing?Uh, er, leaving sir.Leaving? It's 5 minutes to the hour. Different Types of Credit Cards and Features - Part 1 Just as there are too many credit card companies to count, there seems to be just as many different credit cards, all claiming to offer you the best possible deal. Since no two people are alike, not all programs and incentives will work the same for everyone. What You Need To Know About Credit Cards What is a credit card? A credit card is a card that allows you to borrow money to pay for things. There will be a limit to how much you can spend called your credit limit. Identity Theft : They Got Him His hard earned money? Gone. Creditors on his back everyday. Building Your Credit History Today, credit is an indispensable part of our lives. In order to get the things you need, such as a home or a car, you have to apply for a credit. ChexSystems: Alternative Options for People Whove Been Checking Accounts Individual banks elect to become members of ChexSystems, and to use their services.Those individual banks are the ones who decides what is sufficient cause to close your account and report you to ChexSystems.
|
||||||||||||||||||||||||
