CHICAGO — According to a recent study by TransUnion, many
Americans do not understand how credit scoring works or that there are many
credit scoring models.

The project commissioned by TransUnion asked the following
question:

—On a scale of 1 to 5, indicate your understanding of the
different credit scoring models available to you and to lenders?

The credit bureau discovered 26.9 percent of Americans
surveyed said "one" or they have little to no understanding, 14.6 percent said "two,"
and 24.6 percent said "three."

Only 16 percent of Americans surveyed said "five" or they
had a great understanding of the different credit scoring models, according to
TransUnion.

Conducted using Google Consumer Surveys in September,
officials said the survey included 807 Americans, and the results have a 95
percent confidence level.

TransUnion reiterated that credit report scores are often
used by lenders as a predictor of how likely you are to repay your loans and is
generated by a mathematical formula utilizing the data from your credit
reports.

The credit bureau added lenders have been using credit
report scoring as part of lending decisions for more than 20 years.

To help consumers and tips dealers also can share to potential
buyers, TransUnion explained individuals can work towards healthier credit,
including

—Payment history: A good record of on-time payments will
help your credit.

—Outstanding debt: High balances in relation to your credit
limits can lower your credit score. Aim for balances under 35 percent.

—Credit account history: An established credit history makes
you a less risky borrower. Think twice before closing old accounts before a
loan application.

—Recent inquiries: When a lender or business checks your
credit, it causes a hard inquiry and a slight ding to your credit score. Apply
for new credit in moderation.

—Types of credit: A healthy credit profile has a balanced
mix of credit accounts and loans.

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