PRESENTATION ON CREDIT REPORT AND CREDIT SCORE By

PRESENTATION ON CREDIT REPORT AND CREDIT SCORE � � � By ABDUL BARI ZIYAN AHMED

WHAT IS A CREDIT REPORT? How Credit Reports Work A credit report is a detailed breakdown of an individual's credit history prepared by a credit bureau. Credit bureaus collect financial information about individuals and create credit reports based on that information, and lenders use the reports along with other details to determine loan applicants' creditworthiness.

How Credit Reports Work? � � Credit reports typically divide information into four sections. The top of the report contains personal information about the consumer, and in many cases, this section may include variations of the consumer's name or Social Security number, simply because the information was reported incorrectly by a lender or other entity. The second section comprises the bulk of most reports and includes detailed information on lines of credit, also called trade lines. The third section includes public records such as bankruptcies, judgments and tax liens. The bottom of the report lists all of the entities that have recently asked to see the individual's credit report.

KEY TAKEAWAYS: [a] A credit report is a detailed summary of an individual's credit history, prepared by a credit bureau. [b] Reports include personal information, details on lines of credit, public records such as bankruptcies, and a list of entities that have asked to see the consumer's credit report. [c] The three major credit bureaus—Equifax, Experian, and Trans. Union—are each required to provide consumers with one free report each year.

What is Credit Score? A measure of an individual's creditworthiness. Credit s coring involves the quantification of a variety of fac tors in an individual's background, including a histo ry of default, the current amount of debt, and the le ngth of time that the individual has made purchases on credit. Banks and other financial institutions may use a credit score to determine whe ther or not an individual is likely to default on a loa n, mortgage, or other debt.

How Credit Scoring Works? � Credit scoring models may differ slightly in how they score credit. Fair Isaac Corporation's credit scoring system, known as a FICO score, is the most widely used credit scoring system in the financial industry. However, another popular credit scoring model is Vantage. Score, which was created by the three credit-reporting agencies—Trans. Union, Experian, and Equifax.

KEY TAKEAWAYS: [a]Credit scores determine a person’s ability to borrow money for mortgages, auto loans, and even private loans for college. [b] Vantage. Score and FICO are both popular credit-scoring models. [c] Lenders use credit scoring in risk-based pricing in which the terms of a loan, including the interest rate, offered to borrowers are based on the probability of repayment. [d] Credit rankings apply to companies (business) and governments and credit scoring applies to individuals.

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