Sunday, August 3, 2008

Credit Cards and Credit Scores 101... (3)

Here we again on a "shopping spree"... but regardless of tough times the economy is currently dealing with (credit crunch, mortgages, inflation, etc), there is an obvious yet key question we must always keep in mind if we have and use a credit card: it's nice to buy stuff and leave our signature as a "commitment" (feel the "power", Right?) to accept and pay for that stuff but... Are we credit users paying that debt on a timely basis? How "Credit Bureaus" measure our efficiency in paying our debt while using credit (remember, it's not our money... and we must pay for using that money).

Although there are commercial credit reports issued by companies like Dun and Bradstreet,
Credit Bureaus or Consumer Credit Reporting Agencies are companies collecting consumer credit information from businesses and individuals; in the US companies like Equifax, Experian and TransUnion, are important consumer credit report agencies measuring how efficient individual consumers are in paying their debts by issuing Credit Scores where those companies measure such efficiency by using several methods.

A key issue to keep in mind, is the difference between these companies and a
Credit Rating Agency; the latter assign ratings to corporate debt: companies raising funds by issuing debt obligations and becoming public companies.

In a next post, we will mention that although Equifax, Experian and Transunion have different scoring methods, the score most commonly used is known as
FICO because of its origins and development with Fair Isaac Corporation.

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