Credit Score Misconceptions

My score determines whether or not I get credit
Fact:  Lenders use a variety of factors to make decisions regarding your credit that exceed solely your FICO score.  Lenders look at the amount of debt you can handle given your income, your employment history, and your credit history.   Based on their analysis of this information and their specific underwriting policies, lender may extend credit to you despite a low score or decline your request if your score is high.

A low score will haunt me forever
Fact:  Your score is simply a snapshot of your credit at a point in time and it changes as new information is compiled and added to your bank and bureau files.  Scores change gradually as the way you handle credit changes.  Credit problems in the past impact your score less as more time passes.  Lenders request your current score when you apply for credit and they are given the most recent information available.  If you improve your score, you will get approved for more credit and lower interest rates.

Credit scoring is unfair to minorities 
Fact:  A credit score only considers information related to your credit.  Gender, race, nationality, and marital status information is not a factored in.  The Equal Credit Opportunity Act (ECOA) prohibits lenders from allowing this type of information to influence their decision to issue credit.  Independent research has been done to ensure that credit scoring is not unfair to minorities or individuals with minimal credit history.  Scoring has been proven to an accurate and consist ant measure of repayment for all individuals with some credit history.  At any given score,  non-minority and minority applicants are equally likely to pay as agreed.

Credit scoring infringes on my privacy
Fact:  Credit scoring uses the same information your lender is already looking at- the credit bureau report, credit application, and bank file.  The score is simply a numeric representation of that information   Lenders who use scoring will sometimes even ask for less information and there may be fewer questions on the application form.

My score will drop if I apply for new credit
Fact:  If your score drops when you apply for new credit, it is unlikely to drop much.  If you apply for several credit cards in a short time period, multiple requests for your credit report information (called “inquiries”) will appear on your report.  Looking for new credit can equate with higher risk, however, most scores are not affected by multiple inquiries in a short period of time.  Typically, they are treated as a single inquiry and will have little impact on your score.

Be Sociable, Share!