Know What Your Score Is For

Posted by admin on August 4, 2010 under Business | Be the First to Comment

One thing in today’s economy that cannot be easily taken for granted is our credit score. According to a survey conducted year 2005 by the Consumer Federation of America together with Fair Isaac, it was estimated that of 1013 consumers 49% do not have any idea that credit scores can measure credit risk.

Credit reports can be used in various ways that could undermine our interest in economic activities.

Credit scores are numbers generated using a certain formula that defines a person’s credit worthiness. These digits extracted from a person’s free credit report are compared to data on tens of millions of other people.

So, how can a credit score have an effect us?

Having a high credit score is ideal in this day where most of the purchases happen through credit card. Credit approval is one major area where credit score is so crucial. Lenders decide whether to grant a credit application or not depending on what ones credit score is.

Same is the case when you apply for a car or home loan. Lenders would definitely browse on your credit report which they can have an access to through the major credit reporting agencies.

Apart from vital from loan approval perspective, Credit score can also mean different rates of loan. This difference is justified by the credit sore one is having.

The scope of credit score use is now widening. Not only are those credit-lending related businesses have a look at their applicants credit histories but now even fuel stations are using credit scores to determine the rate they ought to give to their customers.

Business units nowadays are taking in a very careful consideration when it comes to taking risk. Thus they need a basis that is not just merely mined out of subjective standards. They need a basis that can be mathematically explained and can be logically verified. Hence most businesses are using credit scores.

If self-esteem defines ones worth as a person, credit score labels ones credit worthiness. It is suggesting how good or bad person is when it comes to managing his or her dues.

If we can be judged readily by just using this credit score then we must make sure that we do have a score that would really reflect our debt repayment abilities. We must not be called ignorant in such matters that may hinder our future purchases plan.