Goodbye to Debt
The new American status symbol and how to achieve it
[Sample credit reports]:
LOW RISK
This credit report is low risk. There are no delinquencies, and revolving balances are generally low compared with available credit. The credit history is also well established, and no new accounts have been opened recently.
SCORE: 750
Date Date Credit Current Current History of
Type of loan reported opened limit balance rating delinquency
Bank credit card 3/98 4/90 $8,000 $300 Current
Car loan 3/98 12/95 $15,000 $8,000 Current
Bank credit card 3/98 2/88 $5,000 $0 Current
Bank credit card 2/98 8/92 $7,500 $100 Current
Mortgage 1/98 6/89 $90,000 $75,000 Current
Retail credit card 12/97 2/88 $1,000 $0 Current
Home equity loan 10/97 3/95 $2,500 $0 Paid
Retail credit card 9/96 5/88 $2,000 $0 Current
Inquiries
Date Source
4/98 Bank
2/98 Retail
Public record/Collection items
None
TIP
Paying your bills on time isn't all that matters. Factors like excessive use of credit and too many inquiries can lead to denial of new credit. In this case, even though credit was approved, the score would have been higher if the report listed fewer inquiries.
AVERAGE/HIGH RISK
This credit report is deemed risky for several reasons. First, the tax lien is a serious negative factor. Second, the ration of balances to available credit lines indicates significant risk. The three 30-day late payments point to a potential risk, given other factors--the recentness of the late payments and the fact that the file is thin, which reflects a lack of experience with managing multiple credit obligations.
SCORE: 610
Date Date Date Credit Current Current History of
Type of loan reported opened limit balance rating delinquency
Bank credit card 2/98 11/94 $3,000 $2,250 Current Three 30-day
late payments
in the past
year
Personal finance loan 2/98 8/97 $1,000 $800 Current
Retail credit card 12/97 5/90 $1,000 $775 Current
Inquiries
Date Source
None
Public record/Collection items
Date Public Record
4/97 Tax Lien
TIP
A lender must disclose the top four reasons why credit was denied.
In this scenario, the cutoff score 640. The person who scored 750 will be approved for credit; the person who scored 610 will be denied. The weight given to various factors depends on what else is in the report.
Sources: Fair, Isaac & Co.; government and financial industry reports
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