How FICO Scores Help You

FICO scores give lenders a fast, objective measurement of your credit risk. Before the use of scoring, the credit granting process could be slow, inconsistent and unfairly baised.  Credit scores – especially FICO scores – have made big improvements in the credit process.  Because of FICO scores:

• People can get loans faster. FICO scores can be delivered almost instantaneously, helping lenders speed up loan approvals.  This means that when you apply for credit, you’ll get an answer more quickly.  Today many credit decisions can be made within minutes -or online within seconds.  Even a mortgage application can be approved in house instead of weeks for borrowers who score abe a lenders score “sut-off.”  FICO scores also allow retail stores, internet sites and other lenders to make :instant credit” decisions.

• Credit decisions are fairer. Using FICO scores, lenders can focus only on the facts related to credit risk, rather than their personal opinions or biases.  Factors like your gender, race, religion, nationality, and marital status are not considered by FICO scores.  So when a lender makes a credit decision based at least partly on your FICO score, you can be sure that the lender’s evaluation of your credit history is fair and objective.

• Older credit problems count for less. If you have had poor credit performance in the past, FICO scores don’t let that haunt you forever.  The impact of past credit problems on you FICO score fades as time passes and as recnt good payment patterns show up on your credit report.  And FICO scores weigh andy credit problems against the positive information that says you’re managing your credit well.

• Does my FICO score alone determing whether I get credit? NO.  Most lenders use a number of facts to make credit decisions, including your FICO score.  Lenders look at infomration such as the amount of debt you can reasonably handle given your income, your employment history, and your credit history.  Based on their perception of this information, as well as their specific underwriting policies, lenders may extend creditto you although your credit score is low, or decline your request for credit although your score is high.

• More credit is available. Lenders who use FICO scored can make more credit available to you or offer better terms because your FICO score gives them more precise information on which to base credit decisions.  It allowes lenders to identify individuals who are likely to perform well in the future, even though their credit report shows past problems.  Even if your FICO score is lower than a lender’s cutoff for “automatic approval”, you may still benefit from you lender’s use of FICO scores.  Many lenders offer a choice of credit products geared to different risk levels.  Most have their own seperate guidelines, so if you are turned down by one lender, another may approve your loan.  The use of FICO scored bives lenders the confidence to offer credit to more people, becausethey have a better understanding of the risk they are taking on.  And this gives you more options when you apply for credit

• Credit rate are lower overall. With more credit available, you may pay less.  Automated credit processes, including credit scoring, make the credit granting process more efficient and less costly for lenders, who in turn have passed savings on to their customers.  And by controlling credit losses by using FICO scores, lenders can make rates lower overall.  Mortgage rates are lower in the United States than in Europe, for example, in part because of the information available to lenders here.

~ by infoonhome on June 15, 2009.