The California Credit Law Blog has posted an article, originally from the Wall Street Journal, that discusses how credit bureaus are collecting extra information on consumers with the intent to sell the information to banks and/or other potential lenders.
Lenders are still leery of approving new loans and are using information from the credit bureaus to look at several aspects of a person’s financial history before approving a loan. It’s about much more than your credit score, although that’s still an important factor.
Some of the things lenders are looking at are:
Credit bureaus plug your credit-record information into a model to generate your estimated income. Things they plug in are the size of credit lines and the payment amount of your mortgage and how long you’ve had it. They also use this method to double-check the income you list on credit applications to decide if you should be approved or not. You can’t see their estimates, however, if you’re denied credit then you have to be granted another chance to provide more information.
Some people don’t have enough credit experience to have a “useful” credit score. However, they still pay rent and utility bills and this helps credit bureaus determine “credit-worthiness.”
Even if those consumers don’t want credit, that information could help them win better rates from insurers, which may use insurance scores based on credit records, and fatten up thin credit files, which some employers check before making hiring decisions.
Credit bureaus say they also would like to offer data on cellphone payments, but have run into concerns over privacy issues, which may require legislation to untangle.
If you owe money, you can run, but you can’t hide. Credit bureaus can now send daily reports to collection companies when a debtor’s financial status changes-say, if new employment information appears or if a debt starts to decline. A drop in credit use would indicate that the consumer has more capacity to pay and a better chance of repaying other outstanding debts.
Since home values have fallen sharply and foreclosures have risen, lenders have become much more wary or new loans. Using home value as a decided credit factor isn’t very widespread, but could affect someone in states such as California or Nevada. This could definitely work in your favor if you’re one of the 25 million Americans who own their own home.
Assets other than your car or home aren’t part of your credit score but may play a role in your financial future. If lenders have a bigger grasp of a consumer’s “balance sheet” they might be more likely to approve loans and be able to more fully assess their risks.
As lenders are beginning to look at all aspects of your financial capability, being careful and timely with all payments and bills can definitely work in your favor should you apply for a loan.
If you have had credit issues and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.
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