When you apply for a consumer or even a business loan, the credit bureau that is used will often be based on what region of the country you live in. If you live in the Eastern & Southeastern United States, Equifax will often be used, Experian for the Midsouth and West, and Transunion for the Midwest. Although all are full national bureaus, each bureau tends to be strongest in those regions and will have the most complete file.

All three bureaus are not mirrors of one another. There may be both good or bad tradelines in one or two bureaus, that are not reported in the others. Some companies that you are applying with will use what’s called a “Tri-Merge”. In a Tri-Merge report, the company you have applied with will see a combined file so that every trade line will be seen. They will also see the credit score you received on each bureau. If one of the scores at one bureau is considerably lower than the score at the other two bureaus, this may influence their decision.

The credit score, which may also be called “Fico Score”, or “Beacon Score”, or “Empirica Score” is a risk score assigned to you. Many companies consider a number of primary and secondary factors about your bureau to determine if your risk level is acceptable. for their standards, but the bureau score is the single most important factor.

Since most companies you apply at will be private institutions, it is at their discretion who will be approved for a loan. What Company A decides is acceptable may not be acceptable to company B. Other important bureau factors include Time in File, high credit, number of Tradelines, number of recent inquiries, total credit card balances, unsecured account balances as a percentage of limits, and derogatory reportings. All of these affect that final credit bureau score.

If you have been approved, great! If you were declined, get a copy of your credit report to see what is on the report. The credit report you receive will probably have a different format than the ones used by companies you have applied at. It will be less technical, will rely more on words than on numbers, and may not have a credit score.

Many large companies will “Auto Decision” your application, meaning a computer will decide if you get the loan or not. Another technique is for the computer to auto decline the applications that are below an absolute low standard and auto approve those with score and characteristics so high that the institution is comfortable granting credit without a person even looking at your application. This means you may be declined by a computer. The applications in between are often sent to a credit person for review.

In many smaller companies, an individual will review every request. Statistics prove that over time, as far as the overall default rate, better decisions are made by the computer risk models. These computer risk models are developed in-house by some large companies, or purchased from outside vendors. Tens of thousands of real applications and their performance over a period of years are assessed in order to create these computer credit risk models and to assign risk levels and scores. They are applied to new applications since prior performance is the best indicator of future performance.

However, mistakes are made.

Example:

When a credit card issuer sets a cap on the amount of unsecured revolving credit they are willing to have any one applicant have (Credit Cards, Lines of Credit). If an applicant is above that threshold, they will be declined. On credit reports, credit cards and lines of credit will be listed on an account as an “R”, for revolving. Many homeowners have an equity line of credit with a high limit which unfortunately, the credit agencies may report as an “R” and incorrectly lump these lines together with credit cards and lines of credit when reporting your total unsecured credit. This error may also be caused by a companies risk evaluation models. This may cause you to incorrectly exceed their maximum and be declined. The credit bureaus may also list this as unsecured credit available, which may slightly lower your score more than if they had correctly listed it as a secured line.

Example:

John Smith has 5 Credit Card for limits for $ 25,000

John also has a home equity line for $50,000

These two are lumped together and now you are shown as having $75,000 in unsecured credit, which some credit grantors may consider too much.

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