Ever wonder how a lender decides whether to grant you credit? For years, creditors have been using credit scoring systems to determine if youd be a good risk for credit cards, auto loans, and mortgages. These days, many more types of businesses including insurance companies and phone companies are using credit scores to decide whether to approve you for a loan or service and on what terms. Auto and homeowners insurance companies are among the businesses that are using credit scores to help decide if youd be a good risk for insurance. A higher credit score means you are likely less of a risk, and in turn, means you will be more likely to get credit or insurance or pay less for it.
What is credit scoring?
Credit scoring is a system creditors use to help determine whether to give you credit. It also may be used to help decide the terms you are offered or the rate you will pay for the loan.
Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, whether you pay your bills by the date theyre due, collection actions, outstanding debt, and the age of your accounts, is collected from your credit...
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