The term credit score has been commonly used for several years, although in reality, the meaning is still unclear to many people.
When we are about to apply for a loan, we may hear about the credit score. It is a term that is gradually becoming commonplace. If you’ve ever heard of this or maybe other terms about companies, there are probably a few questions that haven’t always been easy to answer.
Where does the credit score come from?
But let’s start from the beginning and see what a credit file of any subject contains.
It contains, among other things, the details of your credit transactions: good things, such as all regularly repaid loans, and less good things, such as any default, late payment, court orders, protests, and damages.
How is the credit score used?
With us, your credit score helps us determine the interest rate and the appropriateness of the amount you request.
When you apply for a loan, you may not know your score, but some details can help you understand any rejection and also justify any approval.
Your credit file helps us paint a picture of who you are beyond the number you match. By looking at past and present credit history and analyzing how you managed that loan, combined with several other elements, we can evaluate how you might manage a loan in the future. Can your credit score improve over time?
This is one of the reasons why credit scores can improve over time. A longer history contains more information because you are more likely to have credit-related life events, such as buying a home or owning other assets on your behalf. By analyzing these events, we can evaluate how you handled this story. “Financial” even through the ups and downs of life, such as job changes, marriage, divorce, or children.
Why do financial companies need to know your credit score?
Companies with which you enter into a financial relationship identify your credit score to help you develop a clearer picture of your credit history, then analysts will delve into the significance of that score by eventually requesting additional details about your history. as well as the documents required to apply. However, it is important to dispel a misunderstanding: it is not only important how much you earn, but also how you manage that income, which creditors will take into account. The financial responsibility of each of us is not directly proportional to our income! Here is an example of a credit score and how it works
- 800 – 850 781 – 850
Excellent credit score (A). You need to qualify for the best interest rates and loan terms.
- 740 – 799 720 – 780
Very good credit score (B). There will be no problem in getting a loan at the best interest rate and conditions.
- 670 – 739 658 – 719
Good credit score (C). You need to qualify for most loans with good rates and interest rates.
- 580 – 669 601 – 657
Fair credit score (D). You will have difficulty getting a loan or a credit card.
- 300 – 579 300 – 600
Poor credit score (F). It is doubtful that you will qualify for a credit or credit card.