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All you need to know about the new FICO-Equifax Credit Exposure Credit Rating System
If you are applying for credit, lenders want a snapshot of how likely you are to repay them -- and the credit bureaus and credit rating firms are continually trying to come up with more advanced ways to help them do that. A new credit exposure rating is being tested by FICO and Equifax.
They claim to show how a user will deal with prospective credit. What is more, because it is more granular than conventional credit scoring techniques, it might give some shoppers a better chance of getting credit. It is the latest addition to the FICO Equifax UK 2011 partnership.
Combining the FICO Credit Capacity Index methodology (already in use in the United States) with Equifax's UK consumer information. Whilst most other credit evaluation techniques evaluate what loan approvals you currently have and what your credit histories have been, this new approach tries to forecast your behavior in the near-term.
In simple terms, it works out how you would react to having more credit -- and what would happen if you took on extras guilt that you don't have right now. "We' re looking at the risks if you took out more loans - if you had more than you're paying out now," says Darcy Sullivan, FICO's Senior Direktor of corporate communications.
Like other credit assessment techniques, the accurate algorithm behind the point calculation is a propriety mystery. "It uses information from tens of millions of credit histories to help us forecast how you can deal with additional credit, and we look at what your location could be in a year if you took out additional credit," says Sullivan.
Does the new point number help or does it violate my chance of getting credit? The FICO and Equifax say that UK credit cards publishers could certainly use their solutions to grant credit to an additional 15% more consumer on avarage. Nick firms allege could help lenders find consumers who may have been identified with high-risk conventional credit scores, but who could actually be new credit acting user.
This could be good news for the consumer who has seen how bank ers and credit cards have tightened their credit standards as a consequence of the credit squeeze. "As Andrew Hagger, a MoneyComms financial comments writer and founding director, says, "If this allows for a deeper level of analytics than what bankers are currently doing for themselves, it could be good for the consumer.
"We have some great credit cards out there, some at the top of the best buying desks, but folks say that they are not able to get them unless they have a screechingly neat credit file. "The additional analytics story could be good for the consumer, says Sullivan, because it provides a more accurate assessment and better information for them.
"And the more self-assured a bank is about its credit information, the more likely it is that it will grant credit. "Neil Munroe, Equifax's Foreign Relations and Communication Manager, says the new index would allow creditors to provide new credit to those who can handle it, but would prevent those who have already made "significant commitments" from incurring too much additional credit.
"Munroe says the British authorities have placed a firm burden of debt on creditors to control consumers' debt and affordable prices before granting new loans. A number of British creditors are currently testing the facility, says Munroe. Consumers can't verify how they're evaluating the new index, says Sullivan - it's only for creditors, so there's no consumers edition.
"It' s possible that we will be offering a [consumer version] in the near term, but we currently have no plans," says Sullivan. Meanwhile, you can review your periodic credit statements to see if they contain anything that could lift a lender's brows. Credit bureaus are obliged to provide a copy for 2 on demand.
You will find directions on how to apply for credit information on the credit agencies' websites: