Qualifying for a credit card, a car loan or even a mortgage is increasingly hinging on one thing -- your three-digit "credit score."
The little-known numbers, assigned to you by the nation's three credit reporting bureaus, are sold to lenders to help them predict your ability to pay back borrowed money.
By law, the bureaus are not required to tell you your score. That upsets some activists who say consumers ought to have a right to know.
"It's a number that's going to make or break people and they can't even get it," said Greg Fisher, an Ohio resident and author of a popular credit scoring Internet site.
Computer-calculated scoring models, which range from 300 to 900, assign point values to positive and negative entries in your credit history report.
Generally, the better you manage credit, the higher your score.
High scorers tend to get credit approval on favorable terms, low scorers face more rejection and higher interest rates.
Lenders have flocked to credit scoring in recent years as an objective, speedy and usually accurate method of identifying and weeding out credit-risky consumers from their portfolios.
Mortgage lenders, who adopted scoring two years ago, say scoring has eliminated most of the waiting and paperwork associated with the traditional pre-qualification process.
"Within five minutes you've got an answer," said John Mabery, manager of Prime Lending in Augusta.
Jim Tyler, city president for NationsBank, said credit scores enabled his office to write more loans and have fewer charge-offs since adopting scores in the early 1990s.
"I was a doubting Thomas at first," Mr. Tyler acknowledged. "As a banker who's been around 27 years, I was used to doing things the old fashioned way, eyeball-to-eyeball."
"Scoring does work -- if it wasn't working, it wouldn't be happening."
The scoring process may be secretive and far from perfect, but even its harshest critics acknowledge it has merit.
"I think scoring is a useful tool because it's an objective way of evaluating someone's credit rather than having an old guy sitting behind the desk making the decision," Mr. Fisher said.
THE DOWNSIDE OF SCORING, consumer advocates say, is that it removes the human element from lending and gives individuals less opportunity to "make their case" to loan officers.
"It used to be that you knew the banker and could go down to the bank and tell them your story," said Betty Ashley, director of Consumer Credit Counseling Service in August. "That really is not the case with scoring. There's no story to tell -- you either make it or you don't."
Credit scoring, developed more than 30 years ago, is used more now than ever before.
In 1997, the two largest mortgage lenders, Federal National Mortgage Association (Fannie Mae) and the Federal Home Mortgage Corp. (Freddie Mac), instituted scoring on all mortgages they purchased. Banks and mortgage companies were forced to follow suit.
However, credit scores are still shrouded in secrecy by the three credit bureaus that calculate them -- Experian, Equifax and Trans Union.
The three bureaus, as a matter of policy, do not provide a consumer with his credit score and the law does not require them to do that.
Credit scores, which are sold to creditors under trade names such as "Beacon" and "Empirica," are considered a proprietary product, separate from credit history reports which consumers have legal access to under the federal Fair Credit Reporting Act.
"The credit bureaus are afraid of having the light shone on them because the first thing people will start asking is, `Why is my score like this?"' Mr. Fisher said.
THE CREDIT BUREAUS acknowledge trying to explain to each customer how a mathematical algorithm is used to boil his credit history down to three-digit score would create a customer service nightmare.
"Let's say you ask for your score and it's a 650, suddenly that becomes an issue," said Norm Magnuson, a spokesman for Associated Credit Bureaus Inc., a trade association representing the credit bureaus and reporting agencies.
So what's a good score? There is no such thing, according to the company that pioneered credit scoring, California-based Fair, Issac & Co.
"Good or bad is lender-specific," said Tom Quinn, a senior client support manager for Fair, Isaac. "Lenders have different cutoffs. There's no universal number."
For example, a score of 615 may be enough to qualify for a department store card but not enough for certain types of credit cards. Or a score of 700 could get you the prime rate from one bank but not from another.
Scoring is scientific but anomalies can exist because scores ignore factors not found in credit reports, such as annual income and total assets.
"You can have a widow with $1 million in the bank who can't get a $400 Rich's card because everything was in her husband's name," Mr. Quinn said.
The Florida Times-Union in 1997 reported the story of Lawrence B. Lindsey, a member of the U.S. Federal Reserve Board of Governors who was denied a credit card because too many inquiries on his credit report lowered his score.
The credit bureaus have since modified the scoring models to throw out multiple inquires within a 14-day period so consumers aren't penalized when "shopping around" for car loans and mortgages, Mr. Quinn said.
DESPITE ALL THE VARIABLES and sliding scales, there are a few definitive numbers. For example, 715 is a median score, meaning half of consumers score higher and half score less, according to Mr. Quinn.
Another definite is 620 -- the score a consumer must have in order to qualify for mortgages through Fannie Mae or Freddie Mac.
Other than that, there's not much you can generalize about scoring, lenders say.
"One of the highest scores I've ever seen was for a blue-collar worker," said Phil Wahl, vice president of consumer banking for Wachovia Bank in Augusta. "We turned a guy down once who scored 740 because he didn't meet some of our other criteria."
It doesn't appear credit bureaus will give consumers their scores any time soon, but you can boost your score by simply taking a common sense approach to using credit.
For example, Augusta resident Sara Brown's lack of credit score knowledge didn't keep her from qualifying for a no money down mortgage thorough a NationsBank first-time homebuyer program earlier this year.
The 36-year-old youth minister at Fleming Baptist Church has had a spotless credit history since applying for her very first credit card in 1984.
"That probably made the difference," she said.
Indeed, maxing out credit cards, paying bills late and opening too many credit accounts count against you -- they're statistical traits of people who historically default on loans.
Making sure your credit report is free of errors helps too. A recent study by the U.S. Public Interest Research Group, a consumer watchdog group, found nearly 70 percent of credit reports contained some sort of error.
IF YOU'RE REJECTED for credit based on your score, you can ask the lender to share it with you. They're not required to by law, but many will to help qualify the applicant.
"We can counsel people," said Larry Moss, president of Augusta Mortgage. "It usually takes three or four months to show up on their report though."
Credit scores come with "reason codes" that help explain what affected your score, such as too many accounts or insufficient information. Creditors can share this information with you too.
In fact, it's illegal under the Equal Credit Opportunity Act for creditors to make rejections on vague reasons such as not meeting "minimum standards."
If the denial is based on a past bankruptcy or a short employment history, for example, then the creditor must say so.
Credit scores also must ignore a person's race, religion, gender marital status, residency and birthplace.
Damon Cline covers business for The Augusta Chronicle. He can be reached at (706) 823-3486.
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