What is a Credit Score or Credit Rating?
A Credit Score (also known as a Credit Rating) is a numerical score which represents your creditworthiness, which is essentially how likely you are to be able to repay borrowed money. The score is based upon a Credit Report (a record of your past borrowing and repaying), and upon your loan application to the specific organisation.
Banks and credit card companies use these scores to decide whether to lend money in any given circumstance, and if so, what interest rates and credit limits should be imposed. A Credit Score can also be used to assess what sort of rate a customer can be charged.
Businesses use statistical models to calculate whether the outcome of a potential loan is likely to incur 'bad debt' or 'no bad debt'. As a customer, it is hard to know whether you have a high enough score to be accepted for credit, as the structure of scoring varies between different credit rating agencies and other organisations. Furthermore, many companies will not reveal the minimum credit score required for you to be able to borrow from them.
Your Credit Score is not a fixed number. Just as it may vary from company to company, it can change due to a number of other factors, including your repayment behaviour. Every organisation that makes a profit by lending money will have different criteria which they look for in a customer. It is worth remembering, therefore, that a low credit score with one lender does not mean that you won't be able to borrow from anyone else.
Banks, mortgage and loan lenders and other credit providers base their lending decisions on how likely it is that they will make a return (i.e. whether you make your repayments or go into default), as well as how much money you are likely to generate for them (in other words, the interest rate offered to you). Risk is a key factor, but as "higher risk" customers may end up being charged much higher interest rates, they will often be more lucrative for lenders thatn those customers who always repay in full, or use other means of avoiding interest.
ABOUT TRUST ONLINE