A person's FICO credit score should not be underestimated. Obtained through a system called credit scoring, which strongly determines whether a creditor gives you a credit decision. Credit scores can also be used to determine the credit terms and rates offered to you.
The score is derived after evaluating your credit report. Some of the elements of entering a credit report include the number, type and age of accounts you hold, bill payment history, whether you pay your bills on time and outstanding debt. Creditors then use statistical procedures to compare your loan repayment history with consumers with similar information.
Typically, the scoring system points points to each factor that predicts the person most likely to repay the debt. The credit score, the total score, is before the person's credit. Ideally, it represents the likelihood that a consumer will pay off their debts when they expire.
As a consumer, why is good reputation important to you? As mentioned earlier, your score largely determines whether the creditor is lending you money. If the lender decides to provide credit to you, your score will also be used to determine the amount and terms and rates. Some insurance companies also use credit reports to predict the likelihood and amount of your claim. Therefore, this information is useful to them when deciding whether to provide insurance to you, and the premium they will charge. This includes auto insurance companies. Insurance companies refer to these scores as insurance scores.
Consumers are advised to maintain credibility for a variety of reasons. Here are some other benefits you can get from a good credit score:
• It makes it easier for landlords to approve your rental home and apartment application
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• It gives you more borrowing power. Banks and other financial institutions will find it easy to borrow more money at a lower interest rate. This is mainly because good scores will increase your negotiating ability.
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• Good reputation makes you feel good about yourself - especially if you have to work harder to make your credit score worse or worse.
Bottom line: While lenders often consider many factors [including credit scores] to make credit decisions, a good rating will make them think your risk is lower. In the end, you will receive many types of loans and credits at the lowest interest rate.
Orignal From: Your credit score and its evaluation of you
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