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Credit scores are literally numbers and
figures that estimates credit risk. Credit also
determines credit worthiness of a borrower. Credit
scores serve as guidelines in determining a person’s
financial capability. They play an important role in the
loan approval decisions of lenders
Credit score is like a credit report. In a way that it
reflects a person’s credit standing.
And that creditors
gauge borrowers through their credit scores. Their only
difference is that a credit report is really a report,
it is a documented report, it shows everything, while a
credit score is just a number, a meaningful number.
Sometimes it is part of credit report, since it is just
a number. But this simple number can mean so much. A
certain credit score equates to a borrower’s credit
repute. The higher the borrower’s credit score, the
higher the credit worthiness. We can also say that the
higher the credit score, the higher the chance of
getting approved. |
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| Credit score not only determines the
chance of getting approved, it also determines the
interest rates to be given and the amount of loan to be
approved.
There are many factors to consider in achieving these
credit scores: Age, status, previous credits, manner of
payment and many more. Every details, and circumstances
correspond to a certain point. There are certain credit
transactions and situations that may increase or
decrease your credit score. Example, if you have a
credit score of 500 then you get approved for a credit
card, that transaction may increase or decrease your
credit score.
There are factors that absolutely lower your credit
score. Failure to pay your monthly payments is one, it
means that you can’t afford to have another loan or if
you do, you do not manage your finances well. Another
one is filing of bankruptcy. Filing of bankruptcy has
the most impact in your credit score. If you file
bankruptcy, your points will degrade tantamount, very
huge decrease. It is mainly because; bankruptcy means
you have no other options to settle your obligations.
Another instance that may also decrease your credit
score is when you maximize the use of your credit card.
This is also because of the risk involves in such cases.
However,
However, a certain transaction will not always increase
or decrease your credit score. It always depends on your
current situation. It’s when applying for a new credit
card or loan. If you already have a credit card or a
loan, chances are your credit score will decrease. But
if it’s the first time you get approved for a card, then
it will increase your credit score.
It is very important to know these precautions in
dealing with your finances. For the reason that every
transactions you do has a corresponding point that will
have an impact on your credit score.
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