How Scoring Helps You :

In our earlier posts we discussed about Credit Scores and Credit Score Calculations now we can discuss in detail about how Scoring helps you .

Credit scores give lenders a fast, objective measurement of your credit risk. Before the use of scoring, the credit granting process could be slow, inconsistent and unfairly biased.

Credit scores have made big improvements in the credit process. Because of credit scores:

• People can get loans faster : Scores can be delivered almost instantaneously, helping lenders speed up loan approvals. Today many credit decisions can be made within minutes. Even a mortgage application can be approved in hours instead of weeks for borrowers who score above a lender's "score cutoff". Scoring also allows retail stores, Internet sites and other lenders to make "instant credit" decisions.

• Credit decisions are fairer :Using credit scoring, lenders can focus only on the facts related to credit risk, rather than their personal feelings. Factors like your gender, race, religion, nationality and marital status are not considered by credit scoring.

• Credit "mistakes" count for less : If you have had poor credit performance in the past, credit scoring doesn't let that haunt you forever. Past credit problems fade as time passes and as recent good payment patterns show up on your credit report. Unlike so-called "knock out rules" that turn down borrowers based solely on a past problem in their file, credit scoring weighs all of the credit-related information, both good and bad, in your credit report.

• More credit is available : Lenders who use credit scoring can approve more loans, because credit scoring gives them more precise information on which to base credit decisions. It allows lenders to identify individuals who are likely to perform well in the future, even though their credit report shows past problems. Even people whose scores are lower than a lender's cutoff for "automatic approval" benefit from scoring. Many lenders offer a choice of credit products geared to different risk levels. Most have their own separate guidelines, so if one lender turns you down, another may approve your loan. The use of credit scores gives lenders the confidence to offer credit to more people, since they have a better understanding of the risk they are taking on.

Credit Rates are Lower Overall :

With more credit available, the cost of credit for borrowers is decreasing. Automated credit processes, including credit scoring, make the credit granting process more efficient and less costly for lenders, who in turn have passed these savings on to their customers. By controlling credit losses using scoring, lenders can make rates lower overall. Mortgage rates are lower in the United States than in Europe, for example, in part because of the information - including credit scores - available to lenders here. Knowing and improving your score can also lead to more favorable interest rates.

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Credit Card Fraud - Awareness

As more than 10 million Americans will be affected by credit fraud this year and Credit Card Fraud or Credit Card Hijacking is one of the worst nightmare for anyone. Let's us discuss about it in detail.

Credit card hijacking is the term used when a person’s credit card is used by some unauthorized person (eg: a thief ,Vendor) to buy goods or services. The credit card owner usually has trouble reasserting control over the card, because usually they don't find out immediately, and the owner must distinguish legitimate purchases from illegitimate in a credible manner.

There are four common forms of Credit card hijacking:

1.Identity theft:
One of an example of hijacking credit cards is called identity theft.It is one's deliberate assumption of another person's identity.It can be caused by breach of privacy of one's credit card or it can involve the victim compromising financial or personal information which allows the thief to hijack your existing credit card(s).

2.Credit Card Hijacking by Cancellation Barrier:
Another common form of credit card hijacking is used by subscription companies, the payments for whom are routed through a credit card.The organization creates certain barriers that make it difficult for a credit card user to cancel his subscription easily, and as such continue to charge him for services he no longer desires or needs. This is in direct contrast to the traditional method of subscriptions, where the subscriptions have to be proactively renewed, and are cancelled or suspended if payments are not on time.The credit card makes the user’s money more easily accessible to the subscription company, and the liability resulting from inactivity falls on the user’s shoulders, rather than the company that is providing the service.

3.Negative Option Billing:
Negative option billing is a business practice in which goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing. Negative option billing reverses the usual direction of sales transactions. It assumes that unless you say 'no', you've agreed to have bought the goods. This is the common practice used in book clubs, record clubs, and magazine subscriptions with automatic renewal. Some practitioners of negative option billing prefer to call it "advance consent marketing".

4.Billing for membership rather than services:
If a customer cancels services provided by a vendor, the vender would be committing fraud if they bill for services not provided (for example internet access). Some venders avoid this problem by billing monthly for a "membership", even though no services are used by the former customer. By retaining the membership number in an active status, the vendor makes it difficult for the customer to prove that the membership was cancelled.

As it is now known how Credit card fraud occur, it will be useful to act with caution.

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