What is a credit score and how do lenders use it?
Credit is a transaction in which a person receives merchandise, an automobile, money or services for little or no money up front, and promises to pay in a specified time period (term). How well or not so well you pay for these items are the ingredients which determine your credit score. Your credit record means everything when it comes to borrowing money. Credit reporting agencies collect information about a person to build an individual’s credit record. If you have a positive credit history, you have more options than the consumer with little or no credit or a poor credit record. For a bank or credit union to lend you money, they need to know how reliable you will be in repaying the loan. Lenders base their decision to lend money on several criteria; the most important of these is a credit score. A credit score takes into account the following factors: • Past payment history • Current amounts owed/outstanding debts • Your length of credit history • The number of recent new credit requ
