If you have not any idea about it then you should know that credit score is one kind of numerical expression. It is based on the analysis of a person’s credit files. It represents or shows the creditworthiness of a person. It is very much important to have or secure loans. So, if you are planning to get loans then you need to secure a good credit score. A credit score is used by lenders to check the creditworthiness of a borrower.
What is credit score?
It is a number between 300 to 850. This jumper depicts a borrower’s creditworthiness. The higher credit score can ensure your chance to get loans smoothly. It is related to the number of factors such as credit history, the number of debts, history of repayment and all about open accounts. Lenders check this score to evaluate the creditworthiness of a borrower. From this, the lender can get to know that the borrowers will repay loans timely.
Some key factors of credit score:
Here are some important factors about the credit score:
- The credit score plays a valuable role in lenders’ decision to offer loan to the borrowers.
- Some factors consider the credit score such as types of loans, credit history, repayment history and total debt of the individual.
- It is not at all a smart idea to close a credit account to make a person’s credit score lower.
- Higher credit score can help you to get favourable credit terms.
Who creates a credit score?
Lenders and insurance companies use credit scores created by FICO or Fair Isaac Corporation. FICO score is used most commonly all around the world.
How does a credit score work?
The credit score can affect your financial life. It also plays an important role in the decision of lenders to offer you credit. If you have a credit score below 640 then you are considered to be a subprime borrower. In this case, you will have to pay a high-interest rate.
On the other hand, if your credit score is 700 or above then that will get you a lower interest rate. If you have a credit score of 800 then you will be in an excellent position.
So, as you can see that having a good credit score is very much important. It determines whether you will qualify for a loan or not. In this way, you can save a hundred or a thousand dollars. So, every time you set a financial aim such as becoming a homeowner or buying a new car, the credit score will be a part of your financial scenario. The financial and credit scenario of every individual is different. So, for them, different lenders follow different criteria as well. So, it is always important to strive for a higher credit score. It is important and beneficial for your good financial security and career. If you have a bad credit score then you can make it good by paying bills on time. But you should not close your credit card account. It will negatively affect your overall credit score.