06 Jul Get What You Want!
Surely we’ve all been in situations where we apply for credit hoping to be approved but are curved by the words, “You’ll get a letter in the mail detailing the outcome of your application.” How reliable is the credit scoring system anyway? Credit scoring systems allow creditors to evaluate millions of applicants impartially and consistently on a large variety of different characteristics. In more simple terms, credit bureaus provide comparisons between individuals using a ranking system that determines your creditworthiness. In order for your credit report to be statistically valid, however, credit scoring systems must be based on a large enough sample.
Although it may seem like our credit system is arbitrary, objective, and impersonal, it does help companies, businesses, employers, and lenders make decisions faster and more accurately. These decisions are also less partial than an actual person would be when the system is designed properly. Many creditors intentionally design their systems so that applicants who’s credit scores are not high enough to pass easily or are low enough to fail completely are referred to a credit manager or supervisor who ultimately makes the final decision about whether the company or lender should be willing to extend credit. This typically allows for discussion and negotiation between the credit manager and the applicant.
So what if I am denied or don’t get the terms I want?
If you are denied credit you still have options. The Equal Credit Opportunity Act requires the creditor to give you a notice that tells you the specific reasons why your application was rejected or the fact that you have the right to learn the reasons if you ask within 60 days. Indefinite and vague reasons for denial are illegal, so be sure to ask the creditor to be specific.
Acceptable reasons include:
“Your income was low.”
“You haven’t been employed long enough.”
Unacceptable reasons include:
“You didn’t meet our minimum standards.”
“You didn’t receive enough points on our credit scoring system.”
If a creditor says you were denied credit because you are too near your credit limits on your credit cards or you have too many credit card accounts, you may want to consider reapplying after paying down your balances or closing some existing accounts. Credit scoring systems do consider updated information and change over time.
In some cases you may be denied credit because of information from your credit report. If so, the Fair Credit Reporting Act requires the creditor to give you the name, address, and phone number of the credit reporting agency that supplied the information. You should definitely contact the agency to find out what your report says. This information is free if you request it within 60 days of being denied credit. The credit reporting agency can tell you what’s in your report, however, only the creditor can tell you why your application was not approved.
If you were denied credit or did not receive the rate or terms you wanted, ask the creditor if a credit scoring system was used. If so, ask what characteristics or factors were used, and what would be the best way to improve your application. If you are approved, ask the creditor whether you are getting the very best rate and terms available and, if not, why? If you are not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccuracies ASAP!
Settling is not an option when it comes to your credit. Refuse to live below your privilege by protecting your credit and requesting the very best rates and terms available. Negotiate a credit agreement that will work favorably for you now and in the future.