Credit Scoring

Saturday, September 20, 2008

The credit scoring is compiled by some specified credit agencies. Now the lenders like banks, financial organizations, credit card companies, debt consolidation companies buy such credit reports from the agencies. Such organizations are associated with lending business. On the basis of this report they will decide who is a good borrower. According to the provision of the fair Credit Reporting Act the credit scoring can be used by for other permissible purposes. Negative credit scoring affects negatively ones prospect of getting a fair deal from the lenders. If one gets loan, the rate of interest will be higher. That means the credit rating and rate of interest has inverse relation. If the credit rating is higher, the rate of interest will be lower for the borrower and the reverse will be if the credit rating is lower.

Good credit scoring or rating is also very useful in the matter of employment, insurance, housing, etc. Remember, all the lenders in the market do not follow the same standard. There is no cut off credit scoring below which a person will not get any loan. The lender decided at a particular scoring, which he feels safe to give loan to an applicant. The lender has the power of discretion to give loan to a particular borrower. In many occasions, the lender has to show causes or explain for which he is not offering loan to a particular applicant. The lender also provides the name and address of the credit reporting agency which has compiled the credit history and credit scoring.

Leave a comment

« How a Credit Score is Determined Sample Credit Report - details »
Footer