The New Forms of Credit Scoring and You In the past years, various methods of credit scoring were used to calculate individual credit score. It used to be that credit report score was mostly determined by the number of credit cards owned, the frequency of credit card charges, and the cardholder's capability to pay off these charges. Consequently, those who do not own credit cards may be regarded as a poor candidate for credit. As a result, people who cannot qualify for loans may have little choice but to seek out subprime lenders. How about people with no credit history? A research conducted by the Fair Isaac Corporation reveals that about 50 million Americans have little or no credit history at all. These group of borrowers easily become a target to predatory lenders. Without good credit history, they may find it difficult to get approval from the best lending companies in the market. A New Credit Scoring The FICO scoring system was introduced by the Fair Isaac Corporation in July 2004 and since then, has become the most widely used credit scoring system. It is used by the three major credit bureaus and many leading creditors as well. What makes the FICO scoring model distinct compared to other means of calculating credit rating? The FICO method is based on a number of factors such as the length of one’s credit history, payment history, the credit line usage, the types of account, and public records (bankruptcy, foreclosure, liens, etc.).
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