November 21,2008
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Your Credit Rating(101), Pt.3 –
– Check your weight.In order to lend credibility to the credit card lenders (after all, they're the ones forking out the money), extensive statistical modeling takes place first. So, what's all this ‘weighting' about? These measures will be described individually, in the remainder of this article series. Methods of improving these factors, thereby raising one's credit card rating, will be presented in the forth-coming article series entitled: "Boost your Credit Rating(201)". Again, weighting models are designed to lend high credence for lenders to offer credit card accounts to as many people as possible while still protecting their own assets. To provide this, the reporting agencies will consider a large sampling of consumers for statistical analysis (large samples, randomly selected are proven to be statistically sound). Then, the data is analyzed for credit worthiness.
The seven characteristics mentioned above { a) thru g) } above as well as a few others are then analyzed as to their proven accuracy. Then individual ‘weighting factors' (relative importance) are assigned to each one. These trusted weighting factors are then applied to each individual's score and presented to credit card lenders upon request. The lenders must have reliable predictions that each credit card loan they offer will be repaid on schedule, in order for them to survive. Here are some of the characteristics considered in making these judgments:
1) The total number of accounts a consumer has that are currently being reported. This figure also includes accounts that are in collections. Accounts where a credit card has been lost/stolen or transferred are not included.
2) The number of currently open accounts a consumer has had within the past six months. Credit card accounts that are closed, lost/stolen accounts, transferred credit card balances, and accounts in bankruptcy or other legal designations are not counted here.
3) The number of closed Accounts a consumer has. This is simply the difference between total number of accounts and the number of open accounts described above.