Credit Scores

Credit scores determine if someone gets approved or
declined on any type of credit.

In commercial terms, credit scores are defined as
numerical expression based on a statistical analysis
of a persons credit files, generated by a
mathematical algorithm.

To be more precise, credit scores are determined on
the basis of the certain amount of credit a person has
taken.

His credit statements are compared with the accounts
of other people applying for credit to the same
financial body.

Bankers and credit card companies are termed as
lenders who use credit scores to evaluate the
potential risk while lending money to the consumers
and to alleviate losses due to bad debt.

Credit scores are being used by the lenders to
determine who qualifies for a loan and who does not,
at what interest rate, and what credit limits they
could lend the money to the person and in what time
and what interest they could get their refund back.

There are lenders who sometimes build or create
regression models that predict the amount of bad debt
a customer may incur.

But it is really difficult and hard to predict about
the debt return still it is done to have an idea in
the future if this person is a high risk or worthy of
future credits.

Lenders usually look for higher number as we have seen
that people with highest score get the lowest rate of
interest.

Different countries use different techniques to make
credit scores and similarity is found between Canada
and USA. But the system is said to be better in
Australia.