Credit scoring is used because it is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals. Although you may think such a system is arbitrary or impersonal, it can help make decisions faster, more accurately, and more impartially than individuals when it is properly designed.

A significant factor in determining your credit score is your payment history. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.

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Before deciding to buy credit insurance, ask lender following questions:

How much is credit insurance premium?

Will credit insurance premium be financed as part of loan?

Can you pay monthly instead of financing entire premium as part of your loan?

How much lower would your monthly loan payment be without credit insurance?

Will insurance cover full length of your loan and full loan amount?

Can you cancel insurance? If so, what kind of refund is available?

Prior to signing any loan papers, ask lender whether loan includes any charges for voluntary credit insurance. If you don't want credit insurance, tell lender. If lender still insists that you take out credit insurance, find another lender.

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