Credit Report – the report card of the financial side of life
Credit scores have been compared to report cards by many. This is because the credit score is a reflection of how the money has been handled and how the savings have been done for the purpose of repayment of loans and paying off bills. The credit score, also known as risk scores, are numbers that explain the regularity of the repayment of loans of the concerned person.
Tools of the lenders
When the lenders are approached for a loan, they do not know the person requesting for the loan. It is very hard for them to know if the money lent is safe or not. The credit score is the only way for them to form an opinion of the borrower. The lender is able to plan the return on the money borrowed by the client based on these statistics. Trend analysis is made based on the regularity of the customer. The lender analyses the amount of risk that he has to take based on the ability of the borrower to pay back the money on time.
The credit report is an honest and transparent tool used by the lender to judge and form decisions. He decides the rate of interest based on this report. The lower the credit score, the higher the risk of repayment by the borrower. Based on this result, the lender charges a higher rate of interest on the principle amount because of the high risk involved in getting the money back on time. The lender generates the report at the time the loan is requested. Hence, the credit score is an important decision-making tool used by the lender to anticipate the probability of the borrower returning the money. Without this report, the lender cannot make informed decisions. The lender also uses other data such as the total income received and the approximate expenses of the borrower.
Resume and Report card of the borrowers
The credit report can be treated as the resume or the report card of the borrowers. To prove that they are eligible for loans, credit cards, etc.; they need to work on the scores of the credit report. This piece of paper can decide their future in the financial world. Their ability to borrow money, apply for basic utilities such as cell phones and gas, or find apartments for lease depends on their credit history. For more information we recommend this site.
The better the score, the cheaper it is to get a loan. Lenders are not happy to see a low credit score. They have every right to either deny the loan downright or charge a higher than normal rate of interest to compensate for the risk they have to take in lending the money.
The best part of this credit score is that it is a fluid number. It is not permanent like the grades received in high school. They are liable to change every time it is taken. The borrower can work hard to ensure that the numbers are high so that obtaining various facilities that are based on this score is not difficult. Thus, the credit scores help decide whether the borrower qualifies for the loan and the corresponding rate of interest at which the loan is received. The better the score, the better the terms of the loan.
Other aspects of the credit report.
The other numbers that can be seen in this report are
- The total amount of debt due
- The amount repaid
- The interest charged for each loan
- The amount of loan pending
- The different types of credits
- The remarks made by the lenders with respect to the loans
The decision made by the lender is based on a sum total of all related numbers. The credit score is one of the most important factors based on which decisions are made. There are many ways in which the borrower can increase his credit score to improve his chances of getting loans and other related facilities. The borrower has to keep all figures in mind, not just the credit score before deciding if the loan should be given or not.