Credit scoring

Credit scoring,

Definition of Credit scoring:

  1. Credit scoring is a statistical analysis performed by lenders and financial institutions to access a person's creditworthiness. Credit scoring is used by lenders to help decide on whether to extend or deny credit. A person's credit score is a number between 300 and 850, 850 being the highest credit rating possible. A credit score can impact many financial transactions including mortgages, auto loans, credit cards, and private loans.

  2. The process or practice of generating a credit score; frequently attributive.

  3. A credit score is influenced by five categories—payment history, types of credit, new credit, current debt and length of credit. A person needs to pay special attention to current debt and payment history.

  4. Application of statistical techniques in consumer lending for (1) credit approval (called application scoring), and (2) credit monitoring (called behavior scoring). In application scoring, points are assigned to various elements (applicants after tax income, total household income, years at present job, years at present residence, total loans, etc.). In behavior scoring, elements of credit history are given points to assess the ability to repay and to spot early signs of the possibility of default.

How to use Credit scoring in a sentence?

  1. Credit scores determine a person’s ability to borrow money for mortgages, auto loans, and even private loans for college.
  2. Credit rankings apply to companies (business) and governments and credit scoring applies to individuals.
  3. Lenders use credit scoring in risk-based pricing in which the terms of a loan, including the interest rate, offered to borrowers are based on the probability of repayment.
  4. VantageScore and FICO are both popular credit-scoring models.

Meaning of Credit scoring & Credit scoring Definition