Credit Score: The Loan Granting Tool

| January 5, 2013 | 0 Comments

Credit score is defined as a figure which analyses the credit files of a person, representing the worthiness of the person regarding the issue of credit. Credit score is calculated on the basis of the information in the credit report of the person which is formulated by the credit bureau All the credit issuing institutions consider the credit score of the person prior to granting the loan.

Credit Score

Good Credit Score is a must for Personal Loans

The credit score helps the loan lending institution sot analyze the amount of risk involved in granting to loan to a particular person. The credit score of a person not only determines the ability of a person to pay back the loan but also helps the lenders to decide upon the interest rates to be levied on the person. The credit score also helps the lenders to determine the customer who can in turn help them generate the maximum revenue. The analysis of the credit scores is not only limited to the banks, instead the credit scores are considered by the employers in the recruitment of the employees, determining the dependability of the employee.

The credit score must be above 620 on an average in order to prevent the person from being categorized under those having Bad credit. Bad credit is defined as the condition in which the person is unable to pay the outstanding amount of loan or credit in the specified period of time. Credit score considers all the credit issues of a person. If a person has a bad credit score then he may not be allowed accommodation by the landlords or may be charged a comparatively high rate of security deposit. In order to clear such Bad credits there are Bad credit loans issued by the financial institutions which help in the clearance of bad debts in the shortest span of time. Click here to learn more on the topic.

Personal Loan however is a debt which is taken by a person or a specific business. Personal loans consist of the mortgage loans, credit cards, payday loans, installments etc. The personal loans are however given to a person based upon his viability to pay back the loan. This ability of the person to repay the loan is determined by the credit score of the concerned individual. The borrower can however regulate the period of repayment of loan taken. If a person is capable of paying large installments then he can shorten the period of repayment of loan and vice versa. The amount of the interest which is paid on the loan taken increases as the period of repayment of the loan increases. Hence to be in the advantageous position, the person must repay the loan at the earliest.

The credit score of a person who is borrowing money should always be good. It is necessary for a person to have a good credit score if he is running a business or wants to issue a credit card. A person who has a bad credit score and wants to borrow money is either charged exceptionally high rate of interest or not granted loans at all. Hence, a person must repay all the loans taken in the allotted time and have a commendable credit score granting him all the opportunities to borrow money in future.

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Category: Credit, Loans

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