Credit rating is an appraisal of a potential loan consumer, its normally derived from consumer's financial history, consumer's current assets and liabilities are also tools that determine one credit worthiness, a lender or investor will use these as the primary way to tell if the borrower is able to pay for credit. High credit ratings indicate a borrower's chances to secure credit, while a poor rating indicates high chances of credit defaults.
Some banking institutions will use individual credit ratings to assess how much credit to extend, the interest and the interest to charge.
A Banking institution will need your credit report along with credit scores to assess your chances of securing credit. In America a credit score is normally a three digit number provided for by independent service companies e.g Fair Isaac corporation, in Canada classes of rating are indicated by the ' R' ratings most ratings are by the North American Standard Account Ratings. Big corporation also have credit ratings, however ratings for these are calculated differently, ratings for corporation in America are normally shown in Letters e.g AAA.
How does a bank rate you for credit?
Application form. On the application form the bank will ask of personal details, information on credit cards, current loans, to get credit one has to fill true information failure to which a bank may decline your request, remember that most financial institution may cross reference your information. Dishonesty may cost you.
Credit reference agency files
Credit reports are of interest to many institution, i.e banks, employers, courts, insurance, and any other institution with powers to inquire for this, incase of a lender he will find information regarding your credit report, which will give an entire picture of your financial status and discipline and an overall individual credit worthiness.
Different credit ratings will attract different packages from lenders, its not surprising to find a banking institution lending the same amount on different interest rates, poor rating will attract low funds and high interest, good rating on the other hand guarantee for high credit with low interest, these may however depend on other factors that bank may wish to review.
Good credit rating will always give you excellent response from the banks.
One should strive to keep positive credit ratings, damaged ratings can be repaired by good management of ones credit and paying all credit before a charge off is declared in your account. Consumer credit counselors are available for people willing to build their credit ratings, the service come at a fee but its well worth it.
Maintain positive ratings at all times, and you will have no trouble securing any form of loan or credit from any institution whosoever.