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What Is A Credit Score?Credit score is a statistical method of assessing one’s credit worthiness. Your credit card history, amount of outstanding debt, the type of credit you use, negative information such as bankruptcy or late payments, collection accounts and judgments these all determine one’s credit score. Credit score is commonly known as FICO (Fair Issac Company - which first found out the credit score method) scores are used by creditors to determine how good a credit risk you are. It has a predictive value for guiding the debtors as to how to repay the loan and make timely payments. This credit score is derived from your credit reports, and is made on the basis of a model derived from the analysis of the past credit history of thousands of people. Based on the collective credit history of 1000’s of people credit score is used to evaluate or rather estimate your future behavior in respect of repayment of your loans or paying monthly installments on timely basis. There are 5 different categories or factors that go in to determining a credit score. A score takes in to consideration all the five categories and not just one or two of them. No one piece of information will determine the score. All the factors taken collectively will determine the credit score. The importance of any factor depends on the overall information in your credit report for some people a given factor will be more important than someone else with a given credit history. The details of one’s financial situation are unique and exact formula used in calculation of credit score defers from person to person. It is not possible to predict what factors will be the most important in one’s situation. Thus it is impossible to say exactly how important any single factor is in determining one’s score. What’s more important is the mix of different information which will differ from case to case. Your score only reflects the information in your credit report. It considers both positive and negative information in the credit report. Late payments will lower your score and timely payments will increase. The most amazing part is you don’t have any access to your credit score only the creditors are allowed to see your credit score so that it helps them to make a decision whether it is worthy to lend you a loan. Credit scores have become a must because of the increase in number of bankruptcies over the period of years. Creditors feel risky to lend their money as there is no assurance of getting it back that is in case of unsecured loans so in such situations it becomes viable to study the credit score and then make the decision. | ||
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