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 Credit Score

What is a credit score?

A credit score simply refers to a three digit number that gives a fair idea about your ability to pay your dues. A good credit score indicates a higher chance of you paying your dues on time. A credit score is necessary for several purposes like getting a loan or perform any other credit obligation. A credit score normally depends on the individual’s credit report. An individual can request for his credit report from the companies that are legally assessed to provide credit reports. A simple application on the company’s website or calling a representative on the 24 hours toll free number is enough to get a free credit report. The organisations that are interested in referring to an individual’s credit score are financial lending institutions like banks and credit card companies. After studying the credit score, these institutions can make a decision regarding who would qualify for a loan together with assigning an interest rate and assigning credit limits to the individual.



Credit score systems

The credit score is developed on a mathematical model developed by the company. Institutions that use credit scores in the UK for their lending decisions won’t accept any loan applications if the credit score is below a certain level.

A particular credit scoring model should not differentiate for people of different sexes, colors and creeds. In short, it should be fair to everyone. Your credit report contains a three digit number which is your credit score. All the information on the credit report is converted into a three digit number which simply refers to your credit score. The company evaluating your loan application may just refer to your credit score and may approve the loan. There are many loan companies who may accept a credit score about a particular predetermined limit and then take the decision on the loan. In the past you did not have access to your credit score. Only the lenders of finance and other financial institutions that required referring to it had access to it. However with a lot of pressure from the government and the citizens your credit score is mentioned on your credit report and also on the credit report sites.

 

Conclusion

Hence we see that the credit score is simply a number that is calculated based on your credit history to give a simple answer to the lender whether he should approve the loan or not. The credit score helps the lender assess the risk that he might take in case he lends money to the customer.  However the lender can make the same decision by referring to the credit report. The credit score is relatively simpler to refer and quicker to make a decision. It is also less subjective.

The credit score might be compared with credit scores of other customers with similar profiles. Hence the lenders by referring to the credit score can predict how likely the customer is to repay the loan and make all interest payments on time. 

 
   



 

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