Credit Scoring Explained
If you apply for any form of credit, a lender will probably use credit scoring to judge your credit worthiness and your ability to repay the loan. To arrive at a credit score the lender will look at your credit application form and give so many points for certain information on it. These different factors include your age, if you are a homeoweer, the type of job you have (a profession such as teacher would probably score higher than a manual worker), annual salary, how many years you have lived at the same property and other factors.
Each lender will have their own form of credit scoring. This will be based on their own experience, the industry they work in, and the type of financial product you are applying for. So every time you apply for credit your final credit score could be different. Credit scores are in the range from 0 to 999. The higher the better. If one lender felt that you did not score high enough to meet their criteria it does not mean that all lenders will feel that way. Another lender may make a different assessment and grant you credit. Or you might not score sufficiently to get the full amount of credit you want. You might be offered a lower credit limit, or at a higher interest rate.
Credit scoring is usually an automated process and removes the human element of judgement. This has proved to be a more accurate way of assessing a person's credit worthiness.
It is useful to have some idea of your credit score and also remember that it will change as your circumstances change and the amount of debt that you have changes. And it is important to know how you can improve your credit score.
You will find a step by step guide to this in the Credit Repair System
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