What is Credit Scoring?

Written by John Mussi


Have you ever wondered what is credit scoring? Credit scoring is a system creditors use to help determine whether or not to give you credit.

How does a creditor decide whether or not to grant you credit? Creditors use credit scoring systems to determine if you'd be a good risk for credit cards and auto loans. More recently, credit scoring has been used to help creditors evaluate your ability to repay home mortgage loans.

Information about you and your credit experiences, such as your bill-paying history,repparttar number and type of accounts you have, late payments, collection actions, outstanding debt, andrepparttar 137027 age of your accounts, is collected from your credit application and your credit report.

Using a statistical program, creditors compare this information torepparttar 137028 credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points (a credit score) helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and makerepparttar 137029 payments when due.

What is Credit Insurance?

Written by John Mussi


Are you wondering what is credit insurance? Very simply, credit insurance is an insurance policy that protects a loan onrepparttar chance that you are unable to makerepparttar 137026 repayments. The next time you have occasion to apply for a loan or mortgage, you will be asked if you want to buy credit insurance, or it might already be included in your loan proposal. If so, it will increase your loan amount and you'll pay additional interest.

Credit insurance usually is optional, which means you don't have to purchase it fromrepparttar 137027 lender. Before deciding to buy credit insurance from a lender, think about your needs, your options, andrepparttar 137028 rates you're going to pay. You may decide you don't need credit insurance.

If you decide to get credit insurance be aware that it can be an expensive form of insurance. For example, it may be less expensive and more practical for you to get life insurance than credit insurance.

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