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The positives
These new forms of credit scoring are a wedge into the
traditional credit market that many consumers can use
to prove to lenders that they are a good credit risk.
"There are many people who may be creditworthy
but who don't get credit because of the limits of the
traditional FICO score," says Bruce McClary of
Clearpoint, a consumer credit counseling agency. "For
example, many Hispanic immigrants use cash rather than
credit. They save, which is very admirable, but they
aren't establishing any type of credit history."
Many other consumers
may be able to access credit through nontraditional
scoring methods. These include recent high school or
college graduates, divorcees or widows and people with
some blemishes on their traditional credit report.
"These scores open up a whole new
world of opportunity for people who have chosen not
to access credit or who have had issues with credit,"
says Cate Williams, vice president for financial literacy
for Money
Management International, a consumer credit counseling
agency.
The negatives
While many consumers who haven't had access to credit
may applaud these new scores, other consumers may rue
the day that a lender relied on one of these scores
if that credit isn't used wisely.
"There are problems that could arise
with any system. There is always the potential for abuse
where you could have predatory lenders using these scores
to reach people who they would otherwise not be able
to get to," says McClary.
Williams warns consumers not to be tempted
into taking on more credit than they can handle. "If
you get a credit card as a result of these new scoring
models, ask yourself what do you need that card for,"
she says. "Nine out of 10 people will say it is
only for emergencies, but a shoe sale or dinner out
is not an emergency. Also find out what costs are involved
in any loan or credit card."
As with traditional credit reports and
the traditional FICO score, the newer scores are only
as good as the data they are built on. Just as there
can be mistakes in your credit report, inaccurate information
obtained on your nontraditional payments can negatively
impact your ability to get loans. "Fair Isaac is
becoming a specialized consumer-reporting agency so
the Expansion score will be a dispute-resolution process
where you can fix problems with this score," says
Friery.
Since PRBC is consumer-driven, consumers
will have free access to their data once they are enrolled
in this program. At this time, it's not clear what access
consumers will have to eFunds Debit Reports or Anthem
scores since they are so new.
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