Loan applications are approved and rejected based on the financial credibility of a person, and hence there is one reliable method of getting this done. This method is to get the credit score of a particular person, which will help decide the same. Credit scores are base on certain algorithms, and these algorithms generate from the credit reports or transaction aspects.
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Who checks the credit scores?
Banks and other financial institutions usually check for credit scores before providing any loan or credit. They want to scrutinize the risks involved while lending money to that particular person. They want to know whether you had borrowed or taken any types of loans before and how your repayment history was. Once when you avail of a loan, your repayment track will be uploaded to the credit bureaus. Analyzing the entire repose is rather a time taking and tedious job. There is another possibility that it may not address important details. To solve all these issues, get a standard and instant report of a lender, credit scores generated.
What are the advantages of credit scores?
It usually observed that it would take at least 30 minutes to go through the entire report and make a decision. Consider a situation where the bank manager or the authority from a financial institution has to check the details of three or four customers, and it will take at least two hours for the same. It makes the situation manageable, and instead of going through the entire report, credit scores are issued based on the report. It makes the job more comfortable as it takes only five minutes to know the person’s details. Credit scores come in a common language of understanding, and hence, anybody can easily read and understand the creditworthiness of a person.
What are the common types of credit scores?
There are different types of credit score models available. For every model, as an end product, credit scores will be available. In short, each model aims to provide credit scores. There are three important credit bureaus in the united states. They are Fair Issac and Company (FICO), Experian, and Equifax.
FICO usually provides a score between 300 and 850 based on the creditworthiness of a particular borrower. Major banks and financial institutions generally seek a FICO credit score before lending loans to the customers.
Experian usually gives a credit score between 330 and 830. This scoring method of Experian may resemble FICO, but the score calculating algorithms and the method used to calculate completely.
Equifax, another credit bureau usually provides credit scores between 280 and 850. It observed that the analyzing method of Equifax is rather detailed and easier.
Credit bureaus are maybe checking the payment history of a person as well as current debt with the length of the credit. For people who haven’t taken any loans to date, the credit scores will be calculated based on utility bills and rent payments and factors such as mobile payments.
Can one access his/her credit scores?
A free credit score report is made available for all the citizens in the United States once annually from all the bureaus mentioned above. Some credit card companies provide free credit scores to the customers to make them the customers. The experts opine that it is better to check the credit score report frequently. The reason is that the credit scores may have some mistakes, and hence if you apply for a loan, the loan will be rejected. If you access these reports and make them correct, the problem will be solved. Credit scores will not assure you of a loan or any payments but is a stepping process in the payment.