[...]... clearinghouses, to make decisions about how you’re likely to pay 17 CREDIT SCORES, CREDIT CARDS Credit scoring systems award people points for having credit, using it and making payments on time The more points you have, the better your credit Every time you use a credit card and pay the balance on time, your score goes up; every time you go over your credit limit and pay late, your score goes down Other financial... your three credit reports probably are not the same Lenders, credit card companies and other businesses supply 29 CREDIT SCORES, CREDIT CARDS information to the credit bureaus on a voluntary basis So they may only provide your information to only one agency, or to two or three or none That’s why it is so important to check all three of your credit reports In each case, you’ll find that the credit report... which credit bureau it had received her credit report from; and • what item in the credit report triggered the denial of credit While Janet’s credit score was above 700, she did have an eight-year-old bankruptcy on her credit report And that caused Wells Fargo to deny her application for a credit card—even though the company had been soliciting her If you don’t want credit bureaus to sell your name to credit. .. participate in CarCareONE, a private-label creditcard program from GE Retail Sales Finance So, manufacturers, distributors, retailers and installers can offer their customers instant, on-the-spot credit, as well as 90-day “same-as-cash financing.” 11 CREDIT SCORES, CREDIT CARDS Why do they? According to SEMA, “Many companies find that consumers with CarCareONE credit cards will make larger purchases and... risks…and which people they will trust 21 CREDIT SCORES, CREDIT CARDS with loans Consulting companies like Fair, Isaac & Co help lenders make credit scoring decisions based on information held—and constantly updated—by credit bureaus Throughout this book we refer to the “big three” U.S credit bureaus—Equifax, Experian and TransUnion These companies control the U.S consumer credit scoring industry Their importance... electronics; and • computers These are the credit programs for merchants On the consumer side, credit card companies market their products even more aggressively The best example of this: So-called “affinity” cards These are general-purpose credit cards that are associated with a particular airline or auto maker or membership group These cards usually Visa or 12 CHAPTER 1: WHY CREDIT IS SO IMPORTANT MasterCard,... Otherwise, a CRA can charge you for a copy of your credit report (though that’s changing) Access to your file is limited A CRA may provide information about you only to people with a need recognized by the FCRA—usually to consider an application with a creditor, insurer, employer, landlord or other business 23 CREDIT SCORES, CREDIT CARDS HISTORY OF CREDIT SCORING How did all of this get started? In... independent credit agencies Their accumulated information was more widely available, more accurate and covered a much larger geographical area 25 CREDIT SCORES, CREDIT CARDS These new credit bureaus had to deal effectively with various groups: their subscribers, the people and businesses about whom they reported, their branch office correspondents and the general public But, generally, these early credit. .. information explaining how the score was calculated and how they might improve it Fair, Isaac & Co responded by cutting E-Loan off from its credit formulas, effectively crippling its ability to lend money E-Loan stopped giving away credit scores 27 CREDIT SCORES, CREDIT CARDS FAIR CREDIT REPORTING ACT According to the FTC, the FCRA—which went into effect in 1971—was designed to ensure that consumer reporting.. .CREDIT SCORES, CREDIT CARDS a dime—and it’s all interest-free Or at least it would be interest-free, if people paid off their credit card balances in full each month Most don’t According to Fair, Isaac & Co., which tracks consumers’ credit histories, about 10 percent of Americans have credit card balances that exceed $10,000 On the other hand, . ANGELES, CA  ABERDEEN, WA Credit Scores, Credit Cards How Consumer Finance Works: How to Avoid Mistakes and How to Manage Your Accounts Well Credit Scores, Credit Cards How Consumer Finance. to pay. 18 CREDIT SCORES, CREDIT CARDS Credit scoring systems award people points for hav- ing credit, using it and making payments on time. The more points you have, the better your credit. Every. your credit score was low. 1 8 CREDIT SCORES, CREDIT CARDS Buying a house is the single biggest purchase most consumers will ever make—and the vast majority of people buy that house on credit.