Understanding A Credit Rating/Credit Score
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Bjornson Bernales
By Bjornson Bernales
Published on 03/3/2008
How significant are
credit rating and credit score to an individual? What are their
purposes?
Understanding A Credit Rating/Credit Score
As you go on building your credit standing, it is important to know one of the primary factors in the credit approval decision of many creditors out there.
Credit rating is an important determinant of many lenders. Recently, it has been looked upon by other institutions aside from banks. Several investors have also checked and, to the extent, have relied on the credit rating for their investment decision. This in the case where investors want to invest in a corporation or in a country.
Credit rating is an assessment of the worthiness of an individual, company and even a country for loan grant. The personal credit rating is one of the common factors in determining the credit worthiness of an individual borrower. This is derived from the financial history and present assets as well as liabilities of an individual. The financial history may include credit payments of an individual in the past. The financial strength is also a factor which reflects the current assets and liabilities of an individual.
The credit rating is seen as a factor in determining the probability of an individual to default a loan. A poor rating can be a sign of high risk in defaulting credit payment. Creditors may reject the application of a high-risk borrower or may impose high interest rates.
The credit score, on the other hand is determined from the credit report information sourced from credit bureaus. It is a representation of the credit worthiness of the borrower. Financial institutions primarily banks use it to make an evaluation of the potential risk of delinquency in settling liabilities.
The credit score is based from the statistical analysis of an individual's credit history. It is expressed numerically wherein a high score denotes a preferable rating.
The credit score is a rating applied to individuals. The FICO score is a popular credit score initiated by Fair Isaac Corporation. Other credit bureaus also have their own credit standing product in determining the credit strength and risk of an individual. Credit rating agencies in the United States such as Equifax, Experian and TransUnion use this scoring.
The credit rating for individuals is normally numerical. A high credit score may indicate a favorable rating. A credit score above 700 indicates a good rating.
The credit rating system for corporation is different. Moody's, Fitch Rating and Standard & Poor's are credit rating agencies for corporate entities. Designation of ratings may vary in each rating agency but normally letters A, B, and C are used.
An individual can get a good credit rating and credit score when he takes regard his liabilities and has been prompt in making payments. Delinquency in payment may tarnish the credit rating. A significant drop in credit score will highly occur upon the declaration of bankruptcy which is ominous on the part of the creditor.
If you are still in the process of building up a credit history and, upon realizing the importance of credit rating, you aim to have a good impression from the creditors, it often pays to have stability in acquiring goods, services or money on credit and settlement of liabilities. Financial strength also has its significance.
Meanwhile, it is important to know that the credit score can fluctuate. How is that?
If you have been an horrible borrower, you can still have the chance to change the course of your destiny by repairing the credit rating. You may need an expert to do this. Moreover, it is also important to get to know your credit score and obtain your credit report.
Your credit score may be available in credit rating agencies. You may obtain it freely or with a fee.
The credit score may be different in various rating agencies. Nevertheless, the scores from each of the credit bureaus are fairly proximate. But still, you can inquire and look for errors or any understatements on the credit report.
Credit rating and credit score are fairly similar in significance to an individual borrower. Even rich individuals, though not all, rely on credit score to get good borrowing. If you think of owning a car, a home or estate in the future, you probably have to build your credit standing and would have to be a good borrower so to get a favorable credit score.
Credit rating is an important determinant of many lenders. Recently, it has been looked upon by other institutions aside from banks. Several investors have also checked and, to the extent, have relied on the credit rating for their investment decision. This in the case where investors want to invest in a corporation or in a country.
Credit rating is an assessment of the worthiness of an individual, company and even a country for loan grant. The personal credit rating is one of the common factors in determining the credit worthiness of an individual borrower. This is derived from the financial history and present assets as well as liabilities of an individual. The financial history may include credit payments of an individual in the past. The financial strength is also a factor which reflects the current assets and liabilities of an individual.
The credit rating is seen as a factor in determining the probability of an individual to default a loan. A poor rating can be a sign of high risk in defaulting credit payment. Creditors may reject the application of a high-risk borrower or may impose high interest rates.
The credit score, on the other hand is determined from the credit report information sourced from credit bureaus. It is a representation of the credit worthiness of the borrower. Financial institutions primarily banks use it to make an evaluation of the potential risk of delinquency in settling liabilities.
The credit score is based from the statistical analysis of an individual's credit history. It is expressed numerically wherein a high score denotes a preferable rating.
The credit score is a rating applied to individuals. The FICO score is a popular credit score initiated by Fair Isaac Corporation. Other credit bureaus also have their own credit standing product in determining the credit strength and risk of an individual. Credit rating agencies in the United States such as Equifax, Experian and TransUnion use this scoring.
The credit rating for individuals is normally numerical. A high credit score may indicate a favorable rating. A credit score above 700 indicates a good rating.
The credit rating system for corporation is different. Moody's, Fitch Rating and Standard & Poor's are credit rating agencies for corporate entities. Designation of ratings may vary in each rating agency but normally letters A, B, and C are used.
An individual can get a good credit rating and credit score when he takes regard his liabilities and has been prompt in making payments. Delinquency in payment may tarnish the credit rating. A significant drop in credit score will highly occur upon the declaration of bankruptcy which is ominous on the part of the creditor.
If you are still in the process of building up a credit history and, upon realizing the importance of credit rating, you aim to have a good impression from the creditors, it often pays to have stability in acquiring goods, services or money on credit and settlement of liabilities. Financial strength also has its significance.
Meanwhile, it is important to know that the credit score can fluctuate. How is that?
If you have been an horrible borrower, you can still have the chance to change the course of your destiny by repairing the credit rating. You may need an expert to do this. Moreover, it is also important to get to know your credit score and obtain your credit report.
Your credit score may be available in credit rating agencies. You may obtain it freely or with a fee.
The credit score may be different in various rating agencies. Nevertheless, the scores from each of the credit bureaus are fairly proximate. But still, you can inquire and look for errors or any understatements on the credit report.
Credit rating and credit score are fairly similar in significance to an individual borrower. Even rich individuals, though not all, rely on credit score to get good borrowing. If you think of owning a car, a home or estate in the future, you probably have to build your credit standing and would have to be a good borrower so to get a favorable credit score.