There are three major credit reporting agencies which are Equifax, Experian and Transunion. They all have different formulas that they use to determine credit scores. The beacon credit score is detailed in the Equifax report. It is a program that uses statistics to compare scores and assess account performances.
Fair Isaac Company uses a software program to determine these scores. The higher your credit score, the better. The range is between 300 to 800. Most consumers have an average score of approximately 600.
If you are applying for credit, you will want a response as quickly as possible. This system allows for quick decisions because all of the data is compiled and combined into a credit score.
They look at a variety of factors including your credit history, how long you have been at your current job, salary, how long you have been at your current address and amount of outstanding debt. If you are not sure what your credit score is, you need to request a copy of your credit report.
If you have been denied credit, the Equal Credit Opportunity Act states that the creditor has to notify you as to why you are being denied credit. If there is any information that is incorrect you will want to contact that creditor and correct the information.
If you have been denied credit ask for additional information such as if a credit score was used. Inquire as to the factors that entered into their decision. You may want to ask for advice from them as to what you can do to obtain credit from them. If you are approved, ask them if you are receiving the best terms or rates, and if the rate can be lowered in the future if you pay in a timely fashion.
Keep in mind that if you have a low credit score, you may be denied credit or will have pay a higher interest rate. So essentially, a low score is going to cost you more.
Creditors want to be paid back with interest. It is as simple as that. However, some people borrow money and then disappear or file bankruptcy and then creditors lose out. They want to be able to find you if you owe them money.
You can negotiate with creditors. If you owe a creditor a lot of money, ask if they will reduce the amount you owe if you pay them back in a lump sum. Or let them know if you lost your job or suffered a pay cut, and are just getting back on your feet. It is to the creditor’s advantage to work with you so that you are able to pay them back.