Credit score is a number calculated from the information found on your credit report. A credit score is one of the three major factors in determining if you will be approved for a loan, credit card or other type of credit. A credit score is obtained from your credit report because you have voluntarily made available to the public information that shows how well you handle your debts. It’s up to the lenders and creditors if they want to use this information in their decision to grant or deny a loan, credit card or other type of credit.
What is a credit score and its benefits
1. Rise in consumer credit
This is a major benefit. People who have credit scores and those with similar credit scores are given more opportunities to get loans, credit cards and other types of financial services. As a result people with higher scores will be able to borrow more money than they could before they had a credit score, and companies that provide these types of loans will also benefit.
2. Lenders will be more likely to lend to consumers
One of the major benefits for consumers is that lenders may give more favorable terms on loans because of their credit scores. This can mean better interest rates on the loans, longer repayment periods, lower fees or no fees at all when applying for the loan.
3. Rise in trust and confidence by creditors
One the major benefits of credit scores is that creditors who use the scores are more likely to trust you with a loan, credit card or other type of financial service. If a creditor knows that you have a good score, then they can be more sure that you will pay back the loan or other type of credit on time, every time. This is good for them and most importantly it’s good for you.
4. Credit scoring promotes responsible behavior and positive financial management
Credit scoring helps promote responsible behavior and positive financial management by consumers who know how their credit scores are calculated and what factors affect their scores. Knowing what affects your credit score will help you put into place strategies to improve your score.