Credit score important in getting loan


January 29, 1995|By SUSAN BONDY | SUSAN BONDY,Creators Syndicate

How do bankers determine who gets a "thumbs up" or a "thumbs down" for a credit card, mortgage or car loan? Why are some people flooded with credit-card offers while others get turned down?

Many lenders use credit scoring to decide who gets a loan and who doesn't. Consumers who amass enough points get the loans; those who don't are rejected.

The following test is an example of the scoring system. Add up the points to see how you stack up:

* Length of time at address:

Fewer than two years . . . add no points.

Two to five years . . . add 2 points.

More than five years . . . add 3 points.

* Length of time on job:

Fewer than two years on job/in field . . . add no points.

Two to five years on job/in field . . . add 2 points.

Five years or more on job/in field . . . add 4 points.

* Types of credit references:

Finance company reference . . . subtract 1 point.

No credit history . . . add no points.

Retail card only . . . add 2 points.

Bankcard only . . . add 4 points.

Bankcard and retail card . . . add 5 points.

* Payment history:

Collection, judgment or suit . . .

subtract 5 points.

Usually late 30-120 days . . . subtract 2 points.

Usually late 0-30 days . . . add 1 point.

No late payments . . . add 5 points.

* Scoring:

13-17 points: Accept application, offer loan.

8-12 points: Obtain additional information or references before making decision.

7 or fewer points: Reject application.

Most creditors also set minimum requirements before they will consider an application. For example, a creditor might reject anyone who does not have an annual income of $12,000 or more or anyone who has been through bankruptcy.

Since credit requirements vary, don't give up if you're turned down. Order a copy of your credit report. Check it for errors and try again.

Susan Bondy founded her namesake financial services company 1980 to provide financial planning and asset management. She is a frequent guest on "Good Morning America," the "Today Show" and National Public Radio. She is the author of "How to Make Money Using Other People's Money." Write to Susan Bondy in care of The Sun, 501 N. Calvert St., Baltimore, Md. 21278. All letters will be treated confidentially.

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