Your credit score is what determines your creditworthiness. Simply put, creditworthiness defines how deserving you are of credit. A lender considers you as being creditworthy if it is convinced that you will honor your debt obligations in a timely fashion.<\/p>\n
To avoid a conflict of interest, lenders don't evaluate their clients' creditworthiness on their own. Reputable and independent credit-scoring bureaus usually perform the evaluation of an individual's creditworthiness. These intermediaries use complex mathematical formulas to assess the risk associated with a particular lender and the probability of payment.<\/p>\n
Financial institutions use the ratings from credit bureaus to determine whether you are eligible for credit or not. Your credit bureaus' financial rating also determines the terms under which financial institutions will advance credit to you. If you have a low credit score, you are categorized as a risky borrower. Your loan application will be outright rejected, or the interest rate payable on the loan will be high.<\/p>\n
This post will teach you what a credit score is and how you can check your credit card score. Read on till the end.<\/p>\n
A credit score is a three-digit number that is obtained after an assessment of your credit file. It normally ranges from 300 to 850. 850 being the highest possible score. It estimates how likely you are to honor your debt obligations. Credit- scoring companies extract information from your credit reports and use mathematical formulae to calculate your credit score.<\/p>\n
Credit scores were invented to make decision making easier for lenders. They are a summary of your borrowing history. The thinking behind the use of credit scores by potential lenders is that your past behavior predicts your future behavior. For instance, if you had borrowed money before and paid in a timely fashion, then it is assumed that you will pay the money you seek to borrow.<\/p>\n
Credit scores are not only used by financial institutions. Insurance companies may also check your credit to determine the premiums you should be charged. A landlord may also use your credit score to decide whether you are a deserving tenant or not.<\/p>\n
It is simple, the closer your credit score is to 850, the more deserving you are of credit. A higher credit score increases the chance of your online loan<\/a> being approved. It also earns you favorable credit terms like a lower interest rate. If you are applying for an insurance cover, you'll enjoy reduced premiums.<\/p>\n Using the FICO scale<\/a>, a good credit rating starts from 670 and goes up to 739. A score above 800 is considered exceptional. FICO is the leading credit-scoring bureau in the United States.<\/p>\n It is important to note that the definitions provided by credit-scoring bureaus are only indicative. They are only used for educational purposes. In reality, it is the lending institutions that have the ultimate decision on what a good credit score is. However, it is still advisable to check your credit card score<\/a> regularly.<\/p>\n In the wake of the COVID-19 pandemic, we are curious to see how lenders will evaluate credit scores.<\/p>\nHow to check credit score<\/h2>\n