How To Calculate Your Credit Rating?

Credit Rating Test

The “test” given here can indicate only your relative credit-worthiness. It cannot tell you whether you will actually get credit from particular lenders, whose policies may vary widely according to their experiences, profit targets and tolerance of risk under different economic conditions at different times. One lender, for example, might sign you up if you scored a total of 75 or more points, while another might approve you only if you exceeded 125 points.

Before applying for credit, especially a major loan, it is a good idea to see for yourself just what your credit history is. You have the right under law to ask the lender for the name of the credit reporting agency the institution uses, and to obtain a copy of your record from that agency so you can weigh your chances, correct any errors or append your side of the story. Then discuss your prospects with an officer of the institution where you hope to get a loan.

Be leery of outside organizations that claim they can help you get credit or “fix” your credit report. For a fee, often a substantial one, such operators usually just tell yon what your rights are in investigating and amending your report — something you can do yourself at little cost.

A Hypothetical Credit-Scoring Scheme

1. What is your age?
Under 25 (8) 25-29(12) 30-34(10) 35-39(6) 40-44(14) 45-49(18) 50 or more (25)
2. How many years have you lived at your current address?
Less than 1 (-10) 1-2 (-3) 2-3(0) 3-5(4) 5-9(14) 10 or more (26)
3. Do you own your home or do you rent?
Own (30) Rent (-32) Other (0)
4. How many years have you held your current job?
Less than 1 1/2 (-14) 11/2-3(0) 3-6(5) 6-8(9) 9 or more (16)
5. What bank accounts do you have?
Checking & Savings (24) Savings only (11) Checking only (6) Neither (0)
6. Do you have a current bank loan?
Yes (3) No(0)
7. Do you have a phone?
Yes (9) No(0)
8. How many bank and travel-entertainment cards do you have?
0(0) 1(12) 2 or more (21)
9. How many major department-store credit cards do you have?
0(0) 1-2(5) 3 or more (8)
10. How many loans from a small-loan company do you have?
0(0) l(-4) 2 or more(-12)
11. How many marginal credit references would you have to use?
0(0) l or more (-6)
12. What is your family income?
0-$10,000(-7) $10,000-15,000(0) $15,000-19,000(5) $19,000-25,000(8) $25,000 or more (13)

Total

1 Do not include loans from automobile-finance companies such as GMAC.

2 In filling out an application form, a certain number of credit references are required.

If you have to use small stores without an organized credit-reporting system, you’ll lose points.

Scorecard

If you scored

You’d be in the top

Your bad-debt ratio

If you scored

You’d be in the top

Your bad-debt ratio

151to l75

3%

0.4%

26 to 50

67%

11.0%

126 to 150

8%

1.0%

to 25

84%

14.7%

101to 125

16%

2.5%

-24 to 0

93%

19.2%

76 to 100

28%

5.1%

-49 to -25

98%

22.7%

51 to 75

46%

8.0%

-75 to -50

100%

29.1%

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