Why do lenders use credit scores?
While not all lenders use scores, those who do, use them to help make fast, unbiased decisions on which applicants are likely to pay them back, and pay them back on time. Lenders want to extend credit to people who will repay and avoid lending to those who will not. A scoring model quickly and precisely evaluates your credit history and distills the likelihood that you will repay as agreed into one easy-to-understand number. Before the widespread use of credit scoring, a loan officer could make a subjective interpretation of how likely you were to repay as agreed. Personal judgment could (and often did) influence whether or not people got the credit they applied for. The availability of credit scores has changed that. Scoring models are objective evaluators, a real plus for consumers. If one lender turned down my request for credit, will all the others? No necessarily. If you’ve ever shopped for an auto loan, you know that you may qualify at one bank or credit union, yet be turned down
