Credit scoring

One of the three major credit bureaus defines a credit score as a composite that designates how liable you are to pay on a loan or credit cards as agreed in your contract with the creditor. Essentially speaking, credit scoring predicts future consumer behavior based on past consumer behavior. So, if you pay your bills on time and have a great record of doing so in the past, your credit score will most likely be higher than people who do not. If you carry high balances on your credit cards but still pay on time, you will have a good rating, but not as good as someone who has lower balances and pays on time. There are many variances a credit bureau may hold when it comes to this, but for the most part all 3 credit bureaus keep the same or similar beliefs.

Now, your credit report does not have a number, this scoring comes from the potential creditor you are trying to get a line of credit or loan from. This number is used as a objective estimate of how likely you are to hold a good credit standing by continuing to pay bills on time and not carry too much debt. Credit bureaus do not score you, the companies who extend the credit to you do.

Lenders have their own independent requirements for a potential customer to possess in order to be approved fro credit. While each company has its own standards, you will not find many huge differences from company to company unless a huge interest rate influx takes place. So, each lender will carry its own criteria for determining your worthiness as far as credit is concerned – not the credit bureaus. Credit bureaus merely keep record of your credit and report that information to creditors to make their own decision as to whether you are a viable potential client. Each lender will have its own statistical scoring system that they go by. Again, you probably will not find much variance between different potential creditors categorically speaking.

In this day and age, credit decisions are often made within minutes for lower credit lines. Even more complex types of credit yield answers within hours. Objective credit scoring aids in the expedition of faster answers as to whether you are approved or not when it comes to trying for credit. So, credit scores have become very important – more so than ever before. As a consumer, you should not worry about your credit score if you keep all things that make you a good credit risk like a steady job, on time credit payments to your debtors, and good credit history. One begets the other. Your credit scoring will also change as your credit changes. It will be adjusted due to changes in your report as they happen – whether good or bad.

SO, we cannot stress how important is that you know what is in your report. If you have a good credit history, you still want to check your report for errors.

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