Drug testing

New Credit Scoring Model Could Help Millions

Mark and Beth, a young married couple in their twenties, established a goal to buy a home within the first three years of their marriage before starting a family. They budgeted and used their money wisely in order to save for the down payment. Whenever they purchased something they always paid cash - no credit cards for them. Why waste money by paying interest to a credit card company?

Within two years they'd reached their savings goal and began house hunting. They found their "American Dream" home in a new community with lots of amenities that seemed perfect for their soon-to-be family. They were elated that their years of saving were about to finally payoff.

But, they ran into a big problem when they went shopping for a mortgage. Even though they had enough income to make mortgage payments and enough money saved to afford the down payment, they had no credit history. Lenders had no FICO score to evaluate their creditworthiness in order to offer them a loan. Fair Isaacs Co. established a credit scoring system in the 1980's and since then FICO scores have been used to determine if someone will qualify for a mortgage and the interest rate they would pay.

Over 50 million U.S. adults fall into the same category - they have either too little credit history or no credit history at all. But now thanks to a new FICO formula, called FICO Expansion Score, lenders will now have opportunities to extend credit to consumers based on non-traditional credit data that are excluded from credit bureau reports.

FICO Expansion will consider a wide range of financial transactions including payment activities such as rental payments, deposit accounts, payday loans, book or CD club payment plans, and retail lay-away plans.

Who stands to benefit from this new scoring model? Anyone who makes little use of banks, credit cards, or checking accounts. The "credit underserved" claims Fair Isaac Co, which includes young adults, low-income consumers, widows or divorcees, and immigrants.

And while those in the credit card and mortgage industry see this new scoring model as a potential benefit, those in the credit counseling sector foresee potential problems.

Fair Isaac CEO Tom Grudnowski is excited about his company's new credit-scoring resource. "This extension of the FICO score gives lenders and other businesses another powerful tool ..., while expanding service options for consumers who have missed out on opportunities simply because they lack a traditional credit history."

The opposition, namely debt and credit counselors, see both the good and the bad. Some consumers will benefit by qualifying for less costly credit arrangements. However, others could fall prey to becoming overextended unless they also receive some basic credit and debt education.

Tom Hicks, a credit counselor in Chicago, worries that "with the average American household owing $8,000.00 in credit debt, this could open the door to others finding themselves unable to handle credit properly. Ultimately the burden lies with the consumer," he says.

Fair Isaac Co. estimates that at least half of those without traditional credit profiles will benefit from this new scoring method.

About The Author

? 2004, http://www.yourfreecreditreportnow.com

Author: James H. Dimmitt

Discover more money-saving tips and articles in our free weekly ezine, "To Your Credit" by visiting http://tinyurl.com/bgo9.

Subscribe today and receive FREE bonuses!

limousine chicago service
In The News:

My Student Credit Card Adventure

And some practical advice too!My first credit card?I remember my... Read More

Triple AAA in 30 Days

Have you ever wonder about how to get good credit... Read More

What Should I Do If I?ve Become a Victim of Identity Theft?

Identity thieves take advantage of everyday opportunities to discover your... Read More

How To Prevent Fraudulent Credit Card Transactions

What Are Possible Signs of Fraudulent Transactions see at Web... Read More

Rate Tarts Losing Ability to Cherry Pick

A "rate tart" is someone who switches from one zero... Read More

5 Surefire Ways To Eliminate Credit Card Debt

Do you have enormous credit card debt? You are certainly... Read More

Taking Control of Your Credit History

Your credit history is important; in fact, in this day... Read More

New Law Provides Free Annual Credit Report

As of Thursday, December 1, 2004, one-third of Americans will... Read More

Guide to Credit Terms

Listed below is a useful guide to credit card terms.... Read More

Getting Married? What Are The Finance and Credit Implications?

There is a big difference between looking after your own... Read More

Credit Worthiness

Credit Worthiness is an important business and personal asset each... Read More

Free Credit Report ? Watch Out for Scams

Many people may still not be aware of an amendment... Read More

Can Credit Search Entries Affect Your Ability to get Approved for a New Loan in the UK?

About Search Entries:Every time a lender checks your credit history... Read More

Saving Money with Credit Cards

Having a credit card is a wonderful convenience for those... Read More

4 Steps You Can Take If Your Online Credit Card Application Has Been Refused

Help! I've Been Turned DownYou received an envelope in the... Read More

How To Repair Your Credit Report

A credit report is run on a buyer when he... Read More

Credit Cards - A Blessing or a Curse?

Owning a credit card can be quite an advantage. Whether... Read More

What To Look For In A Credit Card

When you are deciding what type of credit card to... Read More

Identity Theft : They Got Him

His hard earned money? Gone. Creditors on his back everyday.... Read More

Avoiding Credit Card Traps

The next time you open your credit card statement, take... Read More

Cutting Credit Card Costs

What are the APRs charged by the credit cards in... Read More

Home Loans ? Repair Your Credit Before You Buy

Before you take out a home loan or make any... Read More

Credit Reports Inside and Out

The Credit Report is like your scorecard in the lending... Read More

To Repair Credit Is No longer Satisfactory - Learn How To Earn A Millionaires Credit In 30 Days...

To repair your bad credit does not necessarily mean that... Read More

SuperCharged Secret 1 of 5 - Credit Card Utopia

I AM THE CONSUMER. AND I HAVE LOW-RATE SUPER-POWERS!Note: The... Read More

solar led parking lot lights street light gallery Pete's produce ..