How a Credit Score is Determined

Saturday, September 13, 2008

A good credit score increases the prospect of a person to get loan from the lender, but a low credit score just does the reverse. Therefore, as a person associated with the debt market must have a sound knowledge on the subject. You must know, how the credit score is decided.

Credit scoring is decided by using mathematical logarithm. We do not have the scope to explain the detail process over here, but simply in this process a numerical value is assigned to every borrower. This numerical value will give an indication of a borrower’s creditworthiness and hence the lender decides on the basis of this credit scoring if he wants to give him the loan. In USA this scoring ranges in between 300 to 850. In USA all the credit bureau gives a credit scoring. It indicates that how one will be able to meet the credit obligation after taking loan.

Remember, higher credit scoring is good for both the parties. Late payments, troubled collection directly affect your credit scoring. Frequent entry in the public record also adversely affects the credit scoring. Similarly, if the lender seeks your credit score it affects negatively your credit scoring. More enquiries from the side of the lender affect your credit scoring adversely.

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