What is a Credit Score?
Companies have built formulas to turn the information in your credit report into a number that represents how good of a credit risk you are. These numbers are called credit scores. Most credit scoring systems use the same numerical range which is between 300 and 850. A higher score indicates a stronger credit history and is more likely to be looked upon favorably by potential lenders. Credit scores are an extremely important part of how lenders evaluate the likelihood that you will pay back your loan on time, but they also use other information when deciding whether to grant you credit and how much to grant you. While different creditors will evaluate scores differently and there are no hard and fast rules, some general guidelines for what scores mean are shown below. Keep in mind that other factors will also affect the type of credit you might be eligible for.
Credit scoring is another method that some lenders use to determine whether you meet their lending guidelines. This is done by the computer. The computer gives points for positive information and takes away points for negative information. Each creditor has its own guide to evaluate your credit score. If your score is high enough, your credit application will likely be approved.
A credit score is a complex mathematical model that evaluates many types of information in a credit file. A credit score is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service. Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service — specifically, the likelihood that the person will make payments on time in the next two to three years. Generally, the higher the score, the less risk the person represents.
A credit score is a numerical rating that attempts to measure a borrowers creditworthiness. The score indicates the borrowers general payment behaviorssummarizing how often the person pays their bills and obligations on time. A high credit score does not guarantee that a loan applicant will never default on a mortgage; however, that person represents a statistically smaller risk to a lender than a person with a low score. Lenders and creditors, therefore, are more likely to approve loans and offer their most-favorable terms to people with the highest scores.
