|
Articles » Fico Score | | What Is Credit? |
|---|
Credit is the most important factor lenders use to estimate the level of risk of lending money to someone. In other words it shows the lender’s trust in you and your promise to pay back the amount you borrowed in the specified time period. In fact it is your financial history which shows who you are and if others can trust you financially.
You can use your credit to buy products or services, purchase a car or home, make an investment, or start a business. Since you are paying later for something you enjoy today, creditors are often charge you interest. Lenders usually offer better terms and lower interest rates to consumers with good credit . Therefore, you can build a good credit history and save a lot of money every year by increasing your financial trustworthiness.
There are two factors assigned to each person’s Social Security Number (SSN) that can show lenders your credit rating and your financial health; Credit Score which is quicker) and Credit Report (which is more accurate).
Credit score is a number which represents your financial standing. Lower numbers mean “very poor” or “poor” credit (which means higher risk for lenders to lend money) and higher credit scores show “very good” or “excellent credit” (which means borrower more likely will pay back the money, thus lower risk for the creditor).
Credit Report can help the lender to understand your financial situation by showing the history of your mortgages, loans, purchases, etc; and your efforts to paying off those loans on time. Therefore creditor can predict your future financial behavior and decide on terms of your loan by looking at your history.
Comments
Frank February 26, 2009 02:22:14 PM 2:22 PM In my opinion credit is literary equal to trust. So if you have a good credit reputation or a good credit, it means that more and more lenders can trust you and you lend you money. So all these businesses about credit and increasing credit score, etc are just trying to increase your trustworthiness which can be done by common sense.
Seema March 6, 2009 01:31:30 PM 1:31 PM We are just finished with our school and all the learning and we don't have to worry anymore about any scores now. This is what we think after college but there is a score which we have to care for lifelong and it should always be good that is our credit score.
|
|
|
|
