Credit score – what you need to know

| April 5, 2012 | 0 Comments
  • Sharebar

Talking about credit score, if you are working in a financial institution and two different persons come into your office to apply for loans and on closer investigation, you find out that Mr. A’s credit score is excellent at 800 while Mr. B’s is nothing to write home about at 400, whom would you easily extend credit to? To Mr. A of course because in the case of Mr. B, his very low score only points to one thing; he may not be able to repay the loan. A lot of people do not understand that the score they have goes a long way to determine a lot of things in their life, including being extended credit.

What then is credit score? Let’s put it this way, back then in school, your performance in classes is determined by your GPA (Grade Point Average). When it comes to your performance in language and math, SAT and ACT serve as the measuring unit and your scores in these areas what determines if you gain admission into college as a freshman or not. This is the same way credit scores are determined the only difference being that they serve as units for measuring your credit risk level. There is a given standardized formula for determining credit scores.

Still on credit score, when you pay your bills late, make use of unfavorable credit card and does not have any credit references, it has a negative impact on your credit report which in turn lowers your score if adequate measures are not taken to arrest the situation before it escalates. Each time you apply for credit card, home mortgage or even a car loan, the creditors who intend extending credit to you would first analyze your credit report and score before they can extend such credit to you. It is your credit report that tells them the possibility of you paying back the loan and how quick.

As far as your credit score goes, it determines the amount you pay as the premium for your car insurance. It also determines if credit will be extended to you or not. It determines the amount you are supposed to pay as the interest rate for the credit being extended to you. If your score is high then the interest rate will be low but in a situation where your credit score is low, then the interest rate you will pay becomes very high.

Tags: , , ,

Category: Blog, Credit Repair, Credit Resources

About the Author (Author Profile)

Comments (0)

Trackback URL | Comments RSS Feed

There are no comments yet. Why not be the first to speak your mind.

Leave a Reply

You must be logged in to post a comment.