What is the credit rating and how is it calculated?
Validation
credit score In Validation system A number between 300 and 850 (in some Standard300 to 900) is the credit of a user in operations and transactions financial system shows. The higher the score, the more providers Financial facilities, they have more luck and willingness to pay loans and credits to the owner of this privilege. In the credit system, credit scores are used to evaluate the probability of timely repayment of the loan by an applicant. Therefore, credit score plays a key role in the lender's decision to provide facilities and credits to borrowers.
Plan evaluation
It is interesting to know that the credit score system was created by the Fair Isaac company, also known as FICO, and is used by many financial institutions today..
Features of a credit score and how it works
In countries that Validation system It is implemented efficiently and comprehensively. credit score Can significantly affect life finance You make an impact. Because this component plays a key role in the lender's decision to provide you with credit.
For example, people with a credit score below 600 generally have trouble getting good loans with low interest rates and reasonable repayment terms.. Conversely, people with a credit score of 740 or higher are generally considered to be in good standing and can get a loan from the banking system with a lower interest rate, lower interest, and higher number of installments.. Also, scores greater than 800 have excellent and ideal conditions for receiving credit facilities and loans, and are considered popular applicants of lenders..
Complication
While each credit rating agency defines its own standard and range for credit scores, most organizations generally use the following average FICO score range.:
- great: 800 to 850
- very good: 740 to 799
- good: 670 to 739
- fair: 580 to 669
- weak: 300 to 579
So it can be said credit score You that contain statistical analysis of Financial performance directly affects your success in interacting with financial and credit institutions and the banking system of your country.
Banking facilities
How is your credit score calculated?
For example, there are three major credit reporting agencies in the United States, Equifax, Express, and TransUnion, which report, update, and store credit history..
While there can be differences in the information collected by these three centers Validation There are five main components that are evaluated when calculating a credit score:
۱.History(History) Payments
Payment history makes up 35% of your credit score and shows whether a person pays their obligations on time or not..
۲.The total amount of your debt in the financial system
The total amount of your debt in the financial system constitutes 30% of your credit score and represents the percentage of credit that you currently have in front of the financial and banking system of your country..
۳.The age of your accounts and credits
The age of your accounts and credits, or the length of your credit history, accounts for 15% of your total credit score. A longer credit history presents you as a person with a lower risk of defaulting on loan repayments to lenders because there is more data from you to determine your payment history..
۴.Your credit types(Combined credits)
The types of credit that you have at your disposal comprise 10% of your credit score and show whether you have a mix of different loans and various types of credit such as car loans or mortgages and revolving credit such as credit cards in your debt portfolio..
۵.New credits
Your new credit also counts 10% of the total credit calculation and includes the number of new accounts a person recently opened and the new credit they recently applied for..
Do not forget in a validation system StandardIf you have a lot of credit cards and want to close some that you don't use, closing credit cards can actually lower your score..
Investment advice
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