Fact and Fallacies

By: Yaquelin Rojas and Melissa Duque

FALLACIES: Your score doesn't necessary mean that you don't have a credit.

FACT:Lenders use a number of facts to make credit decisions,including your scores. Lenders look at information 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 credit to you although your score is low, or decline your request for credit although your score is high.

FALLACIES: Having a bad score doesn't mean it's going to stay with you forever you can change it.

FACT: A score is a “snapshot” of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit.Therefore by taking the time to improve your scores, you can qualify for more favorable interest rates.

FALLACIES: Almost anyone can look at your credit score.

FACT: Credit scoring evaluates the same information lenders already look at - the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information - fewer questions on the application form, for example.

FALLACIES: Credit scoring is unfair to minorities.

FACT: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act prohibits lenders from considering this type of information when issuing credit.  Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history.

FALLACIES: A score will drop if I apply for new credit.

FACT: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information will appear on your report.Typically, these are treated as a single inquiry and will have little impact on the credit score.

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