Myth: The decision to grant a loan is based solely on the credit score.
Fact: No, a credit score is just one part of a number of factors that lenders examine in a process called “underwriting.”
Underwriting
is the analysis and decisioning process used to evaluate a credit
application. Underwriting criteria vary and are driven by a lender’s
business; among the criteria beyond credit scores that a lender may
consider are:
• Down payment
• Income
• Employment history
• Cash on hand
Myth: Only lower-income consumers are considered sub-prime.
Fact: It
is up to lenders to delineate which consumers they consider, prime,
subprime, etc. These delineations represent a consumer’s risk profile
within a lender’s overall portfolio – not income level. Many lower
income consumers are considered prime and super prime by lenders, while
many wealthy consumers may be considered sub-prime as well.
Myth: Only information about my loans is sent to the three national credit reporting companies.
Fact: The
three national credit reporting companies, Equifax, Experian and
TransUnion, collect information on the credit use of more than 200
million Americans and make it available in credit reports. In addition
to loan and payment information, credit files may include tax liens,
rent payments, utility and cell phone payments, and collection accounts.
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