Credit Scores

Paper Summary:

The paper describes how our credit ratings affect everything from insurance premiums to the interest rates we are offered on loans and deposits required for certain services. The paper explains that a credit score is simply a numerical ranking between 300 and 850 that financial institutions assign to an individual's credit report. This information is then statistically ranked to determine how likely that individual will be to repay credit. The paper discusses how credit scores are established, how they are utilized and what components are considered.

From the Paper:

"Susan's insurance carrier sent her a renewal quote for her automobile policy, which she had held with them for several years at the same rate. Susan had never had an accident or even a speeding ticket, so she was quite surprised to see that her premiums had increased substantially since her last bill! She called the insurer to find out what the source of the increase was, thinking it could be a clerical error, and found out that the financial difficulties with late payments and large debt she had experienced the previous year had been factored into establishing her car insurance cost. Susan was shocked to find out that her financial issues had affected her insurance prices, even though she had never been late in paying a premium nor had any claims on her policy!"

Sample of Sources Used:

• "Credit Bureaus announce how consumers can access free credit reports," FTC publication issued 11/23/04. Available online at http://www.ftc.gov/opa/2004/11/freecredrpt.htm
• "Credit Scoring," in Facts for Consumers, Federal Trade Commission, 1998. Available at http://www.ftc.gov/bcp/conline/pubs/credit/scoring.htm.
• Harney, Kenneth (2006) "Credit Bureaus Share your Loan Application," Washington Post 03/04/06, page F01.
• Lankford, Kimberly (2006) "Boost your score," Kiplinger's Personal Finance March 2006, pp. 86-87.
• "Your Credit Scores," (2005) Federal Citizen Information Center publication. Available at http://www.pueblo.gsa.gov/cic_text/money/creditscores/your.htm

More papers on Credit Scores:

• Term Paper # 93166 : "Buying on Credit"
• Essay # 71906 : "Credit Risk Management (CRM) Software"
• Argumentative Essay # 94816 : "Your Credit Report"

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