Century Funding, Ltd. - Getting Pre-Approved

Credit plays a significant role in your life. But fully understanding what your credit is and how it works may be a challenge. A good place to start is to learn the basics of two credit fundamentals: credit scores and credit reports.

Credit Scores
Credit scoring is a statistically based tool used by lenders to assess the likely future performance on a loan. Scores tell lenders how likely people are to repay their loans, use credit, respond to others, or take other action. The important word is likely, since scores cannot predict with certainty how someone will act. Instead, scores provide a statistical estimate of future performance.

Developing Credit Scores
Credit scores are developed using thousands of consumer profiles. A lender may choose to develop a custom scorecard using their own underwriting decisions and portfolio performance (the good and the bad) as developmental data.

In developing scores, tens of thousands of pairs of credit reports are obtained, one at each of two points in time. The earlier report is used to generate the predictive information, and the later (dated 24 months after the first) to determine the performance of the account in two years since the observation of the predictive information. These records are classified in two groups––those that have exhibited good payment behavior in the two year period, and those that have exhibited bad payment behavior in two years. The objective in building the scorecards is to do the best job of predicting which of these two groups a particular record is likely to be in two years down the road

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