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Who doesn’t use plastic?
FICO, the entity responsible for creating and tabulating credit reports, identifies several consumer cohorts beneath their “new-to-credit” umbrella of borrowers. These consumers include young people; recent immigrants and foreign nationals; people who have been recently widowed; peopled who have been recently divorced; and people who have been able to operate their lifestyle with cash exclusively.
What are my options if I don’t have a traditional credit score?
The previously described consumers can expect to have a difficult time successfully applying for a car loan, private sector student loans, or a home mortgage. It is difficult for lenders to offer substantial amounts of money to loan applicants with little or no credit because lending institutions rely upon credit score to determine their applicants’ risk level. Without credit history a consumer cannot have a credit score because there is no credit history by which to tabulate a score.
No credit history means no credit score, and no credit score means that there is no way for a lender to evaluate risk factor. For these types of consumers, FICO offers the “FICO Expansion” score. FICO Expansion evaluates a consumer’s credibility and financial integrity by analyzing information not usually found on a credit report. The scrutiny of the FICO Expansion score includes alternative information such as payday loans, utility payment history, rental payment history, and checking account maintenance. If you are just beginning to build your credit history and having difficulty applying for a loan, ask your lender if they will accept a FICO Expansion score.
What’s in your credit report?
A traditional FICO credit report, as defined by Fair Isaacs, includes identifying information, trade lines, inquiries, public record and collections items. Not surprisingly, most of this information requires a credit history. Trade lines are literal credit accounts: they include credit cards, loans, and mortgages.
Inquiries refer to requests for credit information that lenders make when they receive a loan application; the number of loans and credit lines a consumer applies for reflects financial stability. Public records and collection items include overdue debt from collection agencies in addition to bankruptcies, foreclosures, wage attachments, liens, court judgments and law suits.
Personal identity information is about the only portion of a credit report independent of credit history. It includes name, place of residence, date of birth, social security number and employment information. Personal identity information has no impact on credit score rating. It is used solely to verify the consumer’s existence.
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