A credit score or credit rating is a method (used in Anglo-Saxon countries) to determine the creditworthiness of the applicant for a loan. He takes the form of a number, with a higher number indicating a better credit rating. The credit score applies only to credits to individuals. Background credit score
Credit scores are granted at the request of banks and other financial institutions by a number of specialized companies (credit agencies). Without such a score, it is very difficult to obtain a loan or credit card. Too low credit rating may be a reason to reject an application, while a little lower may still result in higher interest and / or additional collateral being asked from the person concerned. Money-generating institutions aim to estimate the debtor risk.
The most famous credit rating is determined by Fair Isaac Corporation, also known as FICO. The score determined by this institution is also known as FICO score in the walkways. This score takes the form of a number between 300 and 850. The manner in which this is calculated is not publicly and periodically subject to change. Components in the credit score
The following components are an important part of the calculation of the credit score:
A borrower can improve his credit score by having a correct payment behavior, and not fully utilizing the limit (s) on his / her credit card (s). Bad pay behavior from the past "disappears" over time, but this will only happen after a few years.
Other settings than the FICO use slightly different methods, and print out the credit score in other numbers. Recent developments
The crisis in the US mortgage market is related to the credit score. Mortgages with low creditworthiness have closed down subprime mortgages. Now that many mortgages can not be relieved, financial institutions seem to be burdened with big losses. One fears of more disappointments when resold credit card loans with low creditworthiness are also in trouble.
In the Netherlands and Belgium, credit score is usually not used, but financial institutions are requesting information on the past payment behavior of (potential) customers at the Credit Register Registration Office for the Netherlands and the Positive Credit Center for Belgium. Trade information agencies do, however, bring out credit scores, but can only do this through consultation of public data or with the help of the person in question.
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