Back in the dark ages of credit reporting – say 50 years ago – your credit report contained basic facts plus anything negative that might be reported by a creditor or appear in your local newspaper!
This sounds like a fairy tale, but I do know people who worked for local credit agencies, and their job descriptions included scanning local newspapers for such information. This was back in the days when your credit reporting agency was a local company.
Then credit reporting became more centralized and creditors began reporting both the positive and the negative – and they stopped scanning newspapers to find out if you’d had a few too many and gotten into a bar fight on Saturday night.
Banks and other creditors also began to depend on what is now known as the FICO score.
Now, the only things that affect your FICO score are related to how much credit you use, how much credit is available to you, and how you use your credit.
Federal laws prohibit calculations based on such issues as where your money comes from, your marital status, gender, race, religion, etc. They also are barred from paying attention to whether you receive public assistance. In addition, they may not discriminate against you if you’ve exercised your rights under the Equal Credit Opportunity Act or the Fair Credit Reporting Act.
If you’ve gotten credit counseling, it has no effect on your FICO score. Neither does your age, your employment status, or how much money you keep in a bank account. At one time, your place of residence might affect your perceived credit-worthiness. Now it is not a consideration.
Contrary to what many fear, the number of credit inquiries you make yourself and the number made by agencies who want to know more before promoting their services to you have no effect whatsoever. The only inquiries that are considered when compiling your FICO score are those that you’ve initiated by making application for credit.
While the FICO score is now the standard for mortgage lenders, some banks do use other models, as do other creditors. The information not included in a FICO score could be included in their calculations, so it pays to ask what scoring method a potential creditor is using.
At last count, some 50 different scores are compiled on American consumers today.
There’s even a score to tell creditors whether it is worth their time and effort to try to collect on an unpaid debt!
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