Whether You Are Applying For A Credit Card, A Car Loan, Or A Mortgage, One Of The First Things That Lenders Will Look Into Is Your Credit Score. What Is A Credit Score? This Is A Whole Bunch Of Numbers Arrived At By Calculating Such Factors As: Payment History Amounts Owed Length Of Credit History New Credit Types Of Credit UsedCredit Scores Are Released By The Three Credit Bureaus Experian, Equifax, And Trans Union Each Of Which Provide Different Scores, Based On Different Factors And Credit Rating Systems. As Such, Each Person Actually Has More Than One Credit Score. How Important Is Your Credit Score?When Lenders Let You Borrow Money, This Actually Translates To An Investment On Their Part. They Collect From The Interest As Well As The Principal. However, Like All Investments, Lending Money Involves Certain Kinds Of Risk. For Instance, A Borrower May Miss Out On His Monthly Obligations, Or He May File For Bankruptcy. If Either Of This Happens, The Lender Will Have Lost In His Investment.So To Minimize The Risk Of Loss, Lenders Want To Know As Early As Possible Whether You Are A Good Investment Or Not That Is, Whether You Are A Good Borrower Who Pays His Monthly Obligations Regularly. One Way For A Lender To Determine The Likelihood Of A Borrower To Repay His Obligation Is To Get A Hold Of His Credit Score.The Credit Score Released By Any Of The Three Credit Bureaus Reflects How Good An Investment You Are. Each Score Is Based On Information That The Credit Bureaus Keep On File About You. Based On Such Score, The Lenders Will Be Able To Calculate How Much And What Loan Terms (interest Rates, Down Payments, Etc.) They Will Offer You At Any Given Time. Thus, Low Credit Scores Generally Mean Higher Interest Rates And More Stringent Requirements For Approval Of Your Loan Application. On The Other Hand, High Credit Scores Generally Mean Lower Interest Rates And Lower Monthly Repayments.Is Credit Scoring Really Necessary?There Are Many Instances Where The Importance Of Credit Scoring Is Stressed. For One, The Availability Of Credit Scores Helps People Get Loans Faster. Since Scores Can Be Delivered Quickly, Lenders Can Then Approve Loans Faster. Another Advantage To Having The Credit Scoring System Is That Decisions Involving Credits Are Fairer. Lenders Can Now Base Their Decisions On Facts, Not On Personal Feelings Or Factors Like Gender, Race, Religion, Nationality, And Marital Status, Thus Reducing Discrimination In Credit Approval Processes. Since Lenders Can Now Approve Loans Faster, This Translates To More Credit Available. The Less Time It Takes Them To Mull Through Each Loan Application Means More Loans Getting Approved, Since Credit Scores Gives Them More Precise Information On Which To Base Their Decisions.
