- To assist a creditor (lender) decides whether a user or a borrower has the character and ability to repay as agreed.
- On personal credit, the largest are (a) Equifax (EFX), (b) Experian (XPN), and Trans Union (TU). On business credit,
- Every 12 months. www.annualcreditreport.com
- Not the free reports for EFX, XPN, or TU; however, for a fee or a subscription to a reporting service, scores can be included.
- Practically every grantor of credit also uses reports to decide whether to extend credit. Reports and scores are used not
- No. Each bureau has its own pack of analysts and its own proprietary model.
- The five components are:
a) history of "on-time" payments
b) ratio of current debt to approved maximum
c) length of credit
d) types of credit (installment, credit, cash)
e) new credit
- A tip for each component:
- On the consolidated report from the three credit bureaus (called a "tri-merged report"), the median is the middle of the
- A business credit report focuses on the punctuality of payments. Experian's business profile averages the number of date
- No, but without a good score you will not obtain good financing. If your personal score is below 720 or if your business
- The former if you refer to a credit score or the Fair Issac Corporation. The latter if you refer to Shakespeare's fig in
Dun and Bradstreet (D&B) and Experian.
Although Latin is a dying language, its warning to buyers (caveat emptor) still lives. Alternatively, obtain free scores and
simulate tracking of scores. www.creditkarma.com
only for direct loans but also for insurance, leases and employment.
a) Equifax's Beacon 5.0 scores from 300 to 850,
b) Experian's FICO II scores from 300 to 850,
c) Trans Union's Classic 04 scores from 300 to 850.
Other models score from 150 to 950 and focus on a niche of risks.
d) for car loans, Industry Option FICO,
e) for riskier borrower, Next Gen, and
f) for those with slight or no credit history, FICO Expansion
a) pay on time, especially secured creditors,
b) borrow no more than 30% on each credit card,
c) use each credit card at least once each 6 months and avoid closing accounts with long and good credit,
d) have a variety of debt (mortgage, car loan, credit card) and pay more than the monthly minimum on each credit card,
e) restrain the urge to open new credit cards. Could a family member or friend help?
Before you accept a new low promotional rate and balance transfer, note not merely the rate and term but
specifically the cost of the transfer. Yesteryear's minimal or free fee is now 3% or more. So, if the rate is 3.99% for
12 months and the fee is 3%, your new $10,000 transfer will cost you $699 (6.99%).
three scores. There is not an easy definition of high. In the past, FNMA required 660, but some sub-prime lenders required
only 550. At present, "good" credit starts at 750 on an 850 scale. Higher always is better.
payments as DBT (days beyond terms) and compares a particular business to its industry.
Both D&B's (a) business information report and its (b) comprehensive report offer --
a) a credit rating from 1 (least risk) to 5,
b) the high-low credit, and
c) scoring by percentile (PAYDEX).
Its comprehensive report adds a test of financial stress. For small business, D&B's reports have limited utility because --
trade may be reported irregularly or through the owner's name rather than the business' name, and b) information from
public records itself is limited and often is not re-verified for accuracy.
averages 25DBT, then begin improvement immediately.
The Merry Wives of Windsor I.3.33. << Go Back - 12 Questions on Credit <<