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Credit Scoring Benefits Consumers
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The widespread use of credit scoring allows for speedy, objective analysis of credit
histories. In the early 1980s, the three major credit bureaus, Experian, Equifax and Trans
Union all worked with the Fair, Isaac company to develop generic scoring models that allow
each bureau to offer a score based solely on their data about an individual. A
computer-generated score is compiled using information from your credit report, such as
whether payments have been on time. Then that score is compared to the credit performance of
consumers with similar profiles. The scoring system awards points for each factor that helps
predict who is most likely to repay a debt and produces a single number-your credit
score.
Credit
scoring has allowed companies to offer "instant credit," which was unheard of in years past.
As you browse through aisles of washing machines or peek into the windows of new cars, a
prospective lender can order your score and, if they like what they see, give you loan or
credit approval on the spot. It also means that borrowers are less likely to experience
problems with individual lenders' prejudices. Because credit scoring is objective and based
on large volumes of verified statistical data, credit scoring brings a new level of fairness
to the credit-granting process.
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