A credit rating is a statistical term representing the creditworthiness of a person based upon a numerical assessment of his or her credit files. The credit scoring system is based upon the number and quality of the credit files that have been assigned to an individual for credit purposes. A credit rating is most often based upon information initially sourced from three credit agencies, namely; Equifax, Experian and TransUnion. Credit ratings are used by financial institutions and lenders as a means of determining a borrower's credit worthiness. Credit scores are comparable to academic grades in the world of credit scoring.
The credit-scoring models are designed so that they can be used for different purposes. For example, every time that a lender evaluates your application for a car loan, the loan officer will consider not just your credit scores, but also whether you have a history of filing bankruptcies and the like. This is the credit scoring model at work. Every time that you apply for a credit card, the lender is evaluating your credit scores, the amount of your debt and whether or not you pay on time. Learn more about credit analysis or hire credit repair experts at creditsavvi.com/derogatory-credit-sweep/the-hoth. Another example would be the mortgage rate that you are being offered. When a mortgage company evaluates your mortgage application, it will consider your credit scores as well as the amount of debt you have and whether or not you pay your bills on time. The credit scoring models do consider it wise to offer you a mortgage rate that varies depending on your credit scores. Why? Because the interest rate that they will offer you will depend upon whether or not you are considered a good risk, which is determined by your credit scores. How credit scores are determined is best explained by the three major credit reporting agencies. They evaluate credit reports on an individual basis. One agency, TransUnion, bases its determinations on your payment history with all of your creditors, and the amount of debt that you owe them. Experian, another agency, looks at the details on your credit scores, such as your payment history and the types of accounts that you have opened. Finally, FICO, the last credit scoring model, takes into consideration your current income and any recent changes that you have made to your payment history and the types of accounts that you have. If you have been making all of your payments on time, then FICO will consider you to be a good risk. A few examples of individuals who would benefit from varying credit scores would be people who are in the process of rebuilding their credit, those who are trying to avoid bankruptcy, and those who own their own home. All of these people would definitely benefit from different credit scores and having a decent one will allow them to get better rates on their loans and possibly even to qualify for lower interest rates. Those who don't have too much debt or a history of bankruptcy would also benefit from varying credit scores, though the benefits would be diminished compared to the individual with poor scores. The credit scores are not only used for financial purposes, though. They are also used by landlords and other businesses when deciding whether or not to rent out a place, apartment, or condo. For example, a business owner with a good but not great credit score may want to rent out his place to someone with a better score. This is because someone who has bad credit will most likely default on the rent, which will hurt the business owner's pockets. On the other hand, a business owner with a great score may be able to rent out an apartment to someone who has poor credit, since they will have a lower interest rate than if the renter had bad credit and a high interest rate. Continue reading more on this here: https://www.huffpost.com/entry/raise-credit-score-mortgage-house_l_5d0195c2e4b0304a1209884b.
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