What is Credit Scoring?

Have you ever wondered what is credit scoring? Credit scoring is a system creditors use to help determine whether or not to give you credit.

How does a creditor decide whether or not to grant you credit? Creditors use credit scoring systems to determine if you'd be a good risk for credit cards and auto loans. More recently, credit scoring has been used to help creditors evaluate your ability to repay home mortgage loans.

Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report.

Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points (a credit score) helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

Credit scoring is used because it is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals. Although you may think such a system is arbitrary or impersonal, it can help make decisions faster, more accurately, and more impartially than individuals when it is properly designed.

A significant factor in determining your credit score is your payment history. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.

You may freely reprint this article provided the author's biography remains intact:

John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

---

Auto Loan Buying Tips

Have you ever felt like you bought an auto and... Read More

Alternative Venture Finance: Federal Grants and Loans

While most companies seeking venture capital initially think about angel... Read More

How To Save Money On Car Loans

Have you noticed that everyone seems to have a newer... Read More

No Credit Check Payday Cash Advance Loan - Benefits to Using a Payday Loan

No Credit Check Payday Cash Advance Loan - Benefits to... Read More

Why Choose a Bad Credit Personal Loan?

Listed below are some of the reasons for choosing a... Read More

Student Loan Limits Not Keeping Up with Tuition Rates

As tuition rates at many colleges continues to rise, the... Read More

Why Student Loans are Better Than Credit Cards

You need some more money for college expenses this semester.... Read More

To Find The Right Loan You Must First Find The Right Lender

We have found internet shoppers to be the savviest in... Read More

What is Credit Scoring?

Have you ever wondered what is credit scoring? Credit scoring... Read More

A Guide to Finding Fast Homeowner Loans

Sometimes finding fast homeowner loans can seem impossible? no matter... Read More

Cash Advance Company - Comparing Payday Loan Companies Online

Comparing payday loan companies online saves you time and money.... Read More

A Borrowers Guide to Bad Credit Loans UK

If you find yourself in a situation where you need... Read More

Why Choose a Bridging Loan?

Listed below are some of the reasons for choosing a... Read More

Many People Have Realized the Convenience and Benefits of Online Personal Loans

The Internet has provided a whole new dimension to obtaining... Read More

Loan Basics

There is more than one type of loan. Depending upon... Read More

A Look at Getting a Bad Credit Personal Loan

Trying to get a bad credit personal loan can be... Read More

Finding the Secured Homeowner Loan for You

If you've been thinking of getting a secured homeowner loan,... Read More

Fast Cash Personal Loan - No Credit Check and Very Quick

You can get a payday advance with cheap rates and... Read More

Compare Payday Loan or Cash Advance Lenders Online Before You Borrow

Comparing payday loan lenders, also called cash advance lenders, online... Read More

Unsecured Loans: The Lesser Known Sibling Of Secured Loans

What is man's greatest invention?Some of the latest gizmos would... Read More

What is a Loan?

A loan is money that you borrow and agree to... Read More

A Guide to the Bad Credit Personal Loan

Here is a useful guide to the bad credit personal... Read More

Quick Cash Loans Online - A Fast Way to Get an Emergency Cash Advance

If you need a fast way to get an emergency... Read More

Title Loans - Get More of the Title to Your Vehicle

Title loans have the same features as a secured loan,... Read More

Why Payday Loans Should Be Avoided

If you are considering getting a payday loan for the... Read More

If You?re Looking For Low Cost Car Finance, Loan Companies Offer Some Great Deals

These days having a reliable and safe vehicle to drive... Read More

A Guide to Finding an Adverse Credit Homeowner Loan

If you're searching for an adverse credit homeowner loan, you... Read More

What Are VA Loans?

VA loans are basically mortgages or home loans geared towards... Read More

Cash Loans: The Good, the Bad, and the Debt-Free

Happiness is what they're selling. Relief from the crushing weight... Read More

Try Unsecured Loans! If The Word Secured Doesn?t Fit Your Financial Statement

Big financial goals, no security to supply - it is... Read More

Why Starve Your Needs When Payday Loans are there to Gratify Them

The long awaited paycheque is finally here. However, the reverie... Read More

Finding and Getting Bad Credit Loans

If you don't know where to turn for bad credit... Read More

Understanding Personal Loans, Cash Advances and Payday Loans

Have you ever been short on cash? Has an unforeseen... Read More