How Is Credit Score Rating Done
Having a satisfactory credit score is vital for obtaining a loan. For the purpose of determining the creditability of a borrower, many creditors and lenders often solicit for credit history documents. Several banks and financial institutions often determine the loan eligibility and the repayment capability of a person by analyzing his credit history and by evaluating his credit score. A bad credit score can even limit the approval of a telephone line in the house. Hence, it is very vital to know how a credit score is calculated and what are its pros and cons.
Calculating credit scores and rating them is a flexible process. There are several methods used for calculating credit scores. However, the most routinely used system is the FICO system, introduced by Fair Isaac and Company. All the three major credit bureaus in U.S have their individual version of FICO for providing credit ratings. All the creditors including banks, lenders and credit card companies send credit history reports of every borrower to these credit reporting agencies. Depending on the timely payment of their bills and loans, the reporting agency will determine the ratings.
These credit scores generally are not stable. They keep on changing and tend to go up or down depending on the timely repayment of the credit. If a person doesn’t pay his bills on time, it would be reflected as a negative credit report. Hence, it is always important to pay the bills such as credit card repayments, loan monthly mortgage payments and regular expenses on time so that the credit scores are always higher. These credit ratings are available at any of the three credit bureaus in the country. Knowing about one’s credit score is vital before applying for any loan, doing a home transaction, getting good credit card deals or even before applying for basic necessities such as a phone line.
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