Credit scoring is something that lenders do for predicting your behavior when you get a mortgage, loan, credit card or overdraft. The scoring systems are never published and vary from one lender to the next and from one product to the next. Hence, if one company rejects you, it does not mean that the other will. Credit scoring does not merely dictate the products which you receive. It also dictates the goodness of the ones you get.
Most of the loan rates are typical, which means that the APR depends on the basis of your credit score. If there are the credit cards, and the score is too low for the deal you had wanted, you may get accepted, but receive a different product. Here are 2 myths which need to be cleared:
- There are no blacklists and universal credit ratings: It might feel like as if while every lender scores differently, they use similar information. If one lender faces a bad risk, others receive a bad risk as well. You are given a different credit rating by each credit agency, although lenders which use that score as a part of their decision to lend and each of them want a different borrower.
- Lenders are not obliged to give the credit: The applications are aggregated into millions and banks prefer denying a few of the good quality applicants instead of overspending on personalized vetting processes or accepting many unprofitable customers.
You Should be Financially Attractive
Many of the people find it upsetting to get rejected. While, it is important to check for errors and do everything to be attractive to the lender, at times they are not looking for you. When it comes to credit scoring, different lenders may look for different things and hence a single rejection may not mean rejection by all. However, some borrowers are unattractive and are so to most of the lenders. Most of them will generally turn down bad risks. However, there may be a few which have a fetish for people with poor credit histories since they charge more.
When people are rejected, all that they get to know was that their credit scores were not high enough. Lenders should see you in the best light so that when they are looking, you are dressed at your best looking as attractive as possible. Hence, the fact is that credit scoring is regarding profit and not risk. Even the good risks may be rejected as they will not make money on the bank.
Since banks choose customers for their benefit, the process of scoring is about profit and not risks. While the process also involves risks, those who are not keen to repay are threats to the profit. Even then, the most solvent prospect might be rejected if they do not act in a way so as to generate profits for the lenders. It is better to play the system the sooner you get to know that the banks are here to make money and not help us. It all boils down to sophisticated customer weeding.
|
