Is the System of Credit Ratings Fair – Yes

Is the system of credit ratings fair? Based on my prior work experience in finance, I have to say “yes”; however, there are things concerning the credit rating system that make it seem unfair. There is a lot of misunderstanding about the credit rating system in general . . .

-People don’t understand why lenders use the system of credit ratings.

-They don’t think that prior problems with paying debt should reflect against them after things have gotten better.

-They think that than rather of basing their decision on the credit score, lenders should consider other things.

-The main aggravation for an individual is probably the inaccuracy of the credit report.

Developing an understanding of the system of credit ratings and knowing how to improve your credit score will ease the tension if you are one of these frustrated people who don’t think the credit rating system is fair.

Why do lenders use the credit rating system?

Lenders use the system of credit ratings to protect their interests. That is true. They use it because a credit report gives the overall view of how you handle credit. They want to be confident that you will pay the money back and they want to know whether or not you are currently financially strained.

Will previous past due payments affect your credit score?

A credit report contains credit history, including past due payments. It is a part of the calculation of the credit score. You can’t change history; however, making payments on time for here on out will improve your credit score.

What is used by the system of credit ratings in calculating the credit score?

Most creditors use the FICO score. In calculating it your payment history, amounts owed, length of credit history, new credit, and types of credit in use are considered. Inquiries into your credit make up a small part of it.

Can inaccurate reports be corrected?

Yes, they can. If your credit report contains errors, you can make a credit dispute through the credit bureau. Mistakes are made and you shouldn’t have to pay for them! Getting your credit report corrected is the first step in improving your credit.

How do I improve my credit score through the system of credit ratings?

If you really want to improve your credit, go to the source. There is loads of advice given by well-intending people who don’t really know a thing about the system of credit ratings. If you really want good advice about improving your credit score, download the brochure entitled, “Understanding Your FICO Score” published by myFiCO.

FICO and myFiCO are registered trademarks of Fair Isaac Corporation.