We have all heard of a credit scores, the three-digit numbers lenders use to determine creditworthiness. Credit scores, as we discussed in this blog a couple weeks ago, are used to predict how likely you are to default on a credit account or loan. They are used to set interest rates and terms. But did you know that the credit scores is not the only way a financial institution evaluates your ability to repay a loan? There are actually several scores that are affected when you make a payment or use a credit card.

These scores are also used to determine whether or not the lender is willing to offer you credit. While your credit bureau score must be made available to you under Federal law that is not true for the other scores.  Actually, financial institutions aren't quick to reveal how they make their decisions on creditworthiness. Lenders often consider these other scores proprietary information. So what are these other scores?

The first one on our list is the Attrition-risk Score. This risk refers to the likelihood you will stop using your line of credit. This score is used to determine whether or not to aggressively pursue keeping you as a card holder. If it looks like you may be considering changing credit cards, the lender may send you an offer for a lower interest rate or higher credit limit. Next you have the Behavior Score. While your credit score is an overall view of the way you handle credit, this score focuses on a single account. Do you pay the bill in full each month or frequently pay only the minimum payment. Your behavior score is used to determine how to respond if a payment is missed. If your behavior score shows that you are never late, they will usually not call right away. If you are late consistently, they will call earlier in the delinquency.

 There is a Transaction Score. This score is used when you actually make a purchase and normally is used to determine if this is a fraudulent charge or not. It can also be used to try and determine if you might be headed for trouble. If you suddenly start making cash withdrawals that may throw up a flag that you may be strapped for cash.  Remember lenders are looking to protect the profitability of your account, if you are making cash withdrawals that may mean you have lost your job which would affect you ability to repay your loan. The Revenue Score gauges how much money each account is likely to generate.

There is even a score which predicts the likelihood you will respond to a new offer of credit, it is called your Response Score. With so many different ways for these scores to be affected you should think twice before you pull out that plastic! By following basic financial principals you can know these scores are where they should be, even if you will never see them!!

We are here to help with all your real estate needs. Give Sandy's Team a call at (225) 677-SOLD or email info@sandyco.com.  We are here it help you in East Baton Rouge, Livingston Parish, and Ascension Parish.