Alternative loans are private loans through a lending institution
that are not part of the federal government programs. Alternative loans
are more expensive than federal government loans and should be only
used when all other options have been exhausted. Research all possibilities
for scholarships, grants, work-study, and federal loan programs before
borrowing from an alternative loan program. If you determine you need
an alternative loan, use the helpful comparison chart on the back of
this page and research the lenders for additional information. Choose
the loan that best suits your needs and remember to borrow only what
you need!
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ANSWERS TO
YOUR QUESTIONS ABOUT CREDIT SCORING
WHAT IS A CREDIT SCORE?
A credit score is a number that indicates how likely you are to pay
on a loan or credit card as agreed. It is one piece of information lenders
use when evaluating your application for credit. The way you have handled
credit in the past has a strong link to how you will probably manage
credit in the future.
WHY DO LENDERS USE CREDIT SCORES?
Before the widespread use of credit scoring, a loan officer could make
only a subjective interpretation of how likely you were to prepay as
agreed. Personal judgment could (and often did) influence whether or
not people got the credit they applied for. The availability of credit
scores has changed that. Scoring models are objective evaluations.
HOW CAN I IMPROVE MY SCORE?
The key to improving your score is to consistently pay bills on time.
Credit scores are based on general payment “patterns”, the
mix of credit cards and loans you have, and any indications that you
are actively looking for more credit. Your score will improve as you
continue to handle your credit obligations responsibly.
Think of a score as a “snapshot” of credit risk – it
reflects your risk picture at a specific point in time. A snapshot doesn’t
change, but when you take another one you will probably look a little
different. Similarly, when your credit information changes, your score
changes to reflect that. That’s why lenders obtain your most recent
score whenever you apply for credit
WHERE DO SCORES COME FROM?
Statistical models located at major credit bureaus weigh and measure
many pieces of information in order to generate a score. A credit score
is a composite based on a large number of complex calculations. Scoring
models can weigh and balance these varying factors much more quickly
and precisely than a human trying to evaluate the same information without
the benefit of computerized models.
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SCORING FACTS
AND FALLACIES
FALLACY: A SCORE IS A “GRADE.”
FACT:
A score is a predictor of future performance, not of past behavior.
This may seem like a subtle distinction, but it helps to clarify what
credit scoring does. Scoring allows lender to identify individuals who
are likely to perform well in the future even if credit information
reveals past problems.
FALLACY: A POOR SCORE WILL HAUNT ME FOREVER.
FACT: Just the opposite
is true. A score is a “snapshot” of an applicant’s
potential level of risk at a particular point in time. Scores change
with time and with changes in your credit performance. Past credit problems
fade as time passes and as recent positive data increases. Lenders obtain
new scores just prior to making a decision, so they have the most recent
information available.
FALLACY: CREDIT SCORING IS UNFAIR TO
MINORITIES
FACT: Credit scoring is
a bias-free tool that enables lenders to better forecast an applicant’s
likely hood of repayment, and to do so fairly – for everyone.
WHAT’S IN A SCORING MODEL?
- Recent payment history
- The amount of credit you have access to and are using
- How long a credit history you have
- Whether you have been shopping for credit
- Notification of collection and public record
WHAT’S NOT
- Your race
- Your religion
- Your gender
- Whether you’re married, single, or divorced
- Where you were born
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