Credit reports which calculate credit scores for consumers, are to be well maintained with regular payments to loans and with good credit limit. A person’s credit score is the measuring tool for companies and banks alike, to determine decisions to be made in case of applications for loans, credit card limits and interests rates for loans etc…
Mellody Hobson said that a persons’ credit points are calculated based on various factors, which credit calculation companies follow to determine the spending capacity of a person. This provides employers and banks a solid process to evaluate a consumer and make quick and safe decisions. There are different factors which affect a consumer’s credit score.
Credit companies find payment history, the size of debt a person has amassed, length of credit history, types of credit and types of loans taken and new credit openings by a consumer, as the most important factors. A change in any one of these factors will lead to an overall change in the consumers credit score. A person must maintain a stable and consistent report to obtain good scores. Banks and employers also use these credit scores to evaluate consumers to make loan and employment based decisions.
According to Hobson, the recently launched Home Affordable Modification Program, had undesired effects on credit scores, as this scheme is supposed to help consumers with bad scores improve their credit. However, by applying for this loan, consumers convince companies into believing that the consumer is having a financial crunch, which in most cases caused the credit score of the consumer to drop.
Hobson told consumers that they must keep trying to improve their credit scores, as a drop in a credit score is much less complicated than a foreclosure, which would cause permanent damage to a consumers credit report and his scores. Foreclosure and bankruptcy have more dire consequences on credit scores than a change in the factors controlling the credit score.
Fewer Cards, Less Scores
Consumers who closed their credit card accounts to save on credit, have seen their credit drop further. This is because the cancellation of credit cards leads to a change in the usage of credit, which is a factor in determining your credit score. Credit Bureaus have seen many consumers do so in recent times, and have taken measures to help consumers maintain good credit limit and a credit score.
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