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A number you may never know may be changing your financial life, influencing everything from your credit card interest rate to the kind of home loan you can obtain. It's called a credit score, and a high score will get you credit or a loan faster and more easily than ever before. But a low score means you may pay more interest and be disqualified from some kinds of borrowing -- if you aren't rejected outright. Essentially, your credit score -- a number between 350 and 900 -- is a computer-generated figure that distills your past credit history and, advocates say, predicts how responsibly you will keep up with payments in the future. The computer uses information from your credit reports and information in your loan application. It looks for late payments, collections or bankruptcies, outstanding debt, length of credit history, types of credit in use and the number of recent credit applications. Then, using a formula, the computer program weighs the credit-related activities and comes up with a number. The formula is a closely guarded trade secret, but any kind of negative information is given more weight if it occurred recently. ``The idea is that you can take the diverse credit behavior of a person and boil it down to a single number,'' explained Jamal Munshi, associate professor of finance at Sonoma State University. ``They think certain patterns in a person's life, such as bill paying and consumption, closely correlate with credit risk. '' Those involved in financial services are flocking to credit scoring as never before. An estimated 60 to 70 percent of all financial transactions are now credit scored. ``It's a way of life now for most kinds of borrowing a consumer does,'' said David Williams, public relations manager for North American Mortgage Company. Advocates say the computer-generated score is the most objective way yet to determine who is a credit risk. They point out that scoring is blind to race, gender or ethnic background. Through the precision of scoring, lenders can extend credit to people who might not meet all the conventional lending requirements. ``No information is used in scoring that hasn't always been used in determining credit, it's just a consistent, objective way to do it,'' said Sondra Harris, a spokeswoman for Fair, Isaac and Co., the San Rafael firm that pioneered credit scoring. ``People want to be evaluated in a fair manner and know it's not just a lender deciding if he likes their looks or how he feels about a bankruptcy five years ago,'' Harris said. ``Our research shows more credit has been extended because of credit scoring, not less.'' But many worry that consumers who don't fit the computer model may be denied credit or charged more, even though they have spotless credit histories. Even worse, detractors say, consumers have no right to know their credit scores and nobody, except companies like Fair, Isaac, knows what is going into the analysis. ``What if you have good credit, but your situation differs from the computer model?'' asked Gail Hillebrand, senior attorney with Consumers' Union in San Francisco. ``They've taken a pool of people who don't pay and determined their characteristics, but some people with those characteristics have good credit histories.'' However, the computer score has stood up under scrutiny. A study by the Federal Home Loan Mortgage Corp. showed only one in 100 borrowers with high scores -- above 660 -- fell behind in their payments. On the other hand, more than one out of three borrowers with Fair, Isaac scores under 620 were 60 days late on their mortgage payments. Although a good credit risk and a truly terrible credit risk always have been easy to spot, credit scoring provides a way to measure the credit-worthiness of people who fall in the middle. ``Scores help lenders come to grips with how to judge someone. For example, what does it mean if someone has one 90-day late payment a year ago?'' said Pete Phillippe, sales manager with Washington Mutual, a Santa Rosa thrift. How important the credit score is depends on what kind of loan or credit you are asking for. For instance, when you go for a loan to buy a home or refinance one, credit scoring is only one of the tools used to measure your credit worthiness, lenders said. If the score is a bit low, a loan officer typically will look beyond that, taking into account the equity and the borrower, Williams said. ``We all have a very unique set of past circumstances. There are valid explanations for many things that pop up on a computer screen,'' Williams said. A low score may mean you won't qualify for a fixed-rate mortgage or won't get the lowest interest rate available, Williams added. ``Maybe the borrower qualifies for a sub-prime loan, where the rate is higher, or an adjustable rate mortgage with a lower interest rate for the first three months so he has cash when he needs it most. Maybe we ask for a higher down payment,''he said. At least one person reviews a home loan, but where other kinds of credit are concerned -- department store cards, gas company cards, credit cards and the like -- the credit score is the only measuring tool. ``It's an integral part of the whole industry,'' said Robert McKinley, president of Ram Research Corp., an independent credit card rating company. ``You've become a number and that's pretty much it.'' McKinley said credit card companies use credit scores to decide who gets their low-rate mail solicitations, if they will approve a credit card application and how much interest to charge on an individual credit card. Some credit card companies also re-score their customers at regular intervals, adjusting interest rates up if they see a potential risk, McKinley said. ``It's become a very, very sophisticated marketing machine,'' McKinley said.
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TCM Bank selects Cypress to automate credit card application process - Comput...
TCM Bank selects Cypress to automate credit card application process
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By Staff Writer The bank needed a centralized application processing solution to service its 600 community bank clients in the US. Cypress will deploy Mark ...
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Credit Score = Debt: Build Credit with a Credit Card
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Credit card application leads to bank account withdrawls - AZFamily
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shared by: PastorGallo on: Tuesday, August 26, 2008. This is an example of Business Credit Card Application. This document is useful for conducting Business Credit Card Application.