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 person’s 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.
Credit Scores
Monday 14 June 2010
Credit Scorecards
Credit scorecards are created with the help of statistics. First, all past loan applications of interested consumers are collected.
Categories.
The first one deals with the people who repaid their loans in due time without much hassle.
The second one deals with those of the defaulted.
It is mandatory to compare the first group with the second one to prepare an appropriate scorecard.
Credit scorecards provide a accurate measurement of the likelihood that a customer will repay the credit amount back in the allowed amount of time.
Logit or probit are estimation techniques which are statistically used to predict the probability of default of new clients based on this historical data base.
The default probabilities are then compared to a “credit score”. This score will rank the potential client by their height of risk without explicitly identifying their probability of default.
It is to be noted that the procedure of credit scoring was not always fit enough and it did have drawbacks. Then newer and improved techniques were applied to maintain this method of comparing credits.
These measures are: hazard rate modeling, reduced form credit models, or logistic regression.
The essential differences from credit scoring involve both the data base and the ability to calculate the financial value of a loan, given its risk from a credit perspective.
The data base includes all of the available observations on both defaulted and non-defaulted clients. This makes it much easier to see the effects of macro-economic factors like stock prices, auto prices, interest rates, and home values on the default
Credit Scorecards
Categories.
The first one deals with the people who repaid their loans in due time without much hassle.
The second one deals with those of the defaulted.
It is mandatory to compare the first group with the second one to prepare an appropriate scorecard.
Credit scorecards provide a accurate measurement of the likelihood that a customer will repay the credit amount back in the allowed amount of time.
Logit or probit are estimation techniques which are statistically used to predict the probability of default of new clients based on this historical data base.
The default probabilities are then compared to a “credit score”. This score will rank the potential client by their height of risk without explicitly identifying their probability of default.
It is to be noted that the procedure of credit scoring was not always fit enough and it did have drawbacks. Then newer and improved techniques were applied to maintain this method of comparing credits.
These measures are: hazard rate modeling, reduced form credit models, or logistic regression.
The essential differences from credit scoring involve both the data base and the ability to calculate the financial value of a loan, given its risk from a credit perspective.
The data base includes all of the available observations on both defaulted and non-defaulted clients. This makes it much easier to see the effects of macro-economic factors like stock prices, auto prices, interest rates, and home values on the default
Credit Scorecards
Credit Report
It's really awesome to buy products without clearing the full bill and keeping the transactions on the way.
But one must remember that while doing transactions in credit they must keep an eye on the credit facilities and must have their credit reports of the last transactions.
Credit reports tell us about the person’s details, address, contact number, personal details, where he/she works, social security number, and marital status, descriptions about previous jobs, recent positioning, income, debt, and length of employment and also it contains other factual history of your credit experience with the credit granter.
But on credit reports no records of arrest, specific purchase, and medical records are kept. Credit report are being sold out by the credit reporting agencies where you are being evaluated for business, insurance, employment and other purpose allowed by federal laws.
People can get their credit reports only by calling the agency, there are three credit bureaus suppliers Experian, Equifax, and Trans Union.
It is very essential to update your credit profiles. If it is not updated then the agency couldn’t provide the latest information to the bankers about your positioning and it is duly needed to maintain accuracy.
If there are errors in your credit repot one can straighten them out by going to the agency that reported the bad report and the agency is bound to fix the problem, as long as the debt has been cleared.
Always have your paid statements ready as well as your returned checks or credit card information to verify any payment made.
But one must remember that while doing transactions in credit they must keep an eye on the credit facilities and must have their credit reports of the last transactions.
Credit reports tell us about the person’s details, address, contact number, personal details, where he/she works, social security number, and marital status, descriptions about previous jobs, recent positioning, income, debt, and length of employment and also it contains other factual history of your credit experience with the credit granter.
But on credit reports no records of arrest, specific purchase, and medical records are kept. Credit report are being sold out by the credit reporting agencies where you are being evaluated for business, insurance, employment and other purpose allowed by federal laws.
People can get their credit reports only by calling the agency, there are three credit bureaus suppliers Experian, Equifax, and Trans Union.
It is very essential to update your credit profiles. If it is not updated then the agency couldn’t provide the latest information to the bankers about your positioning and it is duly needed to maintain accuracy.
If there are errors in your credit repot one can straighten them out by going to the agency that reported the bad report and the agency is bound to fix the problem, as long as the debt has been cleared.
Always have your paid statements ready as well as your returned checks or credit card information to verify any payment made.
Friday 11 June 2010
Credit Reference
Credit is granted when an organization or an individual makes money enough to give its customers some of it to borrow. There are mainly two kinds of credit-
a) Home loans, or mortgages, and personal or shop loans are linked to a specific item or items and
b) Revolving credit on payment cards can give an individual access to a fixed amount of money that he or she can spend as he or she wishes, in a wide range of retailers and other outlets.
Credit reference can also be referred to as credit history. It is handy information, which holds the creditors personal information, be it of a person or an institution or an organization.
It provides dealers an account of credit applicants’ past credential dealings in order to make a more accurate decision.
Credit rating agencies essentially play this role in while working with consumer credit. Potential lenders, that is individuals or organizations or institutions that are interested in investing their money, consult with established credit rating about appropriate applicants.
These initial talks are necessary for it decides whether the said person, organization or institution is reliable enough to be granted credits.
Credit references helps to assess whether if an applicant’s credit history indicates proper, timely payments on all outstanding obligations.
A lender would be able to judge all by himself whether that the applicant will make timely payments on the requested loan or not.
Credit references also indicate the applicant’s bank account, what type of account it is,
a) Home loans, or mortgages, and personal or shop loans are linked to a specific item or items and
b) Revolving credit on payment cards can give an individual access to a fixed amount of money that he or she can spend as he or she wishes, in a wide range of retailers and other outlets.
Credit reference can also be referred to as credit history. It is handy information, which holds the creditors personal information, be it of a person or an institution or an organization.
It provides dealers an account of credit applicants’ past credential dealings in order to make a more accurate decision.
Credit rating agencies essentially play this role in while working with consumer credit. Potential lenders, that is individuals or organizations or institutions that are interested in investing their money, consult with established credit rating about appropriate applicants.
These initial talks are necessary for it decides whether the said person, organization or institution is reliable enough to be granted credits.
Credit references helps to assess whether if an applicant’s credit history indicates proper, timely payments on all outstanding obligations.
A lender would be able to judge all by himself whether that the applicant will make timely payments on the requested loan or not.
Credit references also indicate the applicant’s bank account, what type of account it is,
Wednesday 9 June 2010
Credit Rating Agencies
Nowadays a country’s financial growth depends on how much its citizens invest and its annual expenditure and profit.
Giving credit has always been in fashion, for it brings in good money to the potential lenders.
In the same way it allows consumers to have means to participate largely into the country’s financial benefits in this enormous money play discipline in of utmost importance.
Credit bureaus maintain credit records and likewise Credit rating agencies determine the appropriate rates according to which consumers and lenders work out their dealings.
Credit rates provided by credit rating agencies function as guidelines in such cases. The issuers are companies, cities, non-profit organizations, or national governments issuing debt-like securities that can be traded on a secondary market.
It is obvious that credit rates are never the same for everyone. They are set on the basis of risk-based pricing. Risk-based pricing is a way of price differentiation based on the different expected costs of different borrowers, as set out in their credit rating.
There are more than hundred credit rating agencies around the world. The top listed credit rating agencies that assign credit ratings for corporations include the following:
* A. M. Best (U.S.)
* Baycorp Advantage (Australia)
* Dominion Bond Rating Service (Canada)
* Fitch Ratings (U.S.)
* Moody’s (U.S.)
* Standard & Poor’s (U.S.)
* Pacific Credit Rating (Peru)
* Egan-Jones Ratings Company (U.S.)
Credit rating agencies are not spared from criticism, for their inability to downgrade countries readily enough and also supporting unscrupulous company
management.
Giving credit has always been in fashion, for it brings in good money to the potential lenders.
In the same way it allows consumers to have means to participate largely into the country’s financial benefits in this enormous money play discipline in of utmost importance.
Credit bureaus maintain credit records and likewise Credit rating agencies determine the appropriate rates according to which consumers and lenders work out their dealings.
Credit rates provided by credit rating agencies function as guidelines in such cases. The issuers are companies, cities, non-profit organizations, or national governments issuing debt-like securities that can be traded on a secondary market.
It is obvious that credit rates are never the same for everyone. They are set on the basis of risk-based pricing. Risk-based pricing is a way of price differentiation based on the different expected costs of different borrowers, as set out in their credit rating.
There are more than hundred credit rating agencies around the world. The top listed credit rating agencies that assign credit ratings for corporations include the following:
* A. M. Best (U.S.)
* Baycorp Advantage (Australia)
* Dominion Bond Rating Service (Canada)
* Fitch Ratings (U.S.)
* Moody’s (U.S.)
* Standard & Poor’s (U.S.)
* Pacific Credit Rating (Peru)
* Egan-Jones Ratings Company (U.S.)
Credit rating agencies are not spared from criticism, for their inability to downgrade countries readily enough and also supporting unscrupulous company
management.
Tuesday 8 June 2010
Credit History
Credit according to the financial experts, is a contractual agreement in which a borrower receives something of value at a particular point of time and agrees to repay the lender at some later date.
Credit is believed to determine the borrowing capacity of an individual or company. Credit history is the record of someone or their organization’s financial dealings based on credit.
It is an account of their past borrowing and repaying. It also contains facts about late payments and bankruptcy, if there is any.
A credit reputation can also be used as an alternative to credit history. Credit history is generally maintained by credit bureaus set up in several countries.
When a customer interested in obtaining credit applies for credit from a bank, whether it is a nationalized bank or private bank, his personal inputs are forwarded to these credit bureaus.
From time to time these bureaus updates the status of the credit holders’ accounts, cross checks their personal information, like their address or contact numbers and records even the change of names, if there is any.
All these detailed information are required to understand the applicant’s credit worthiness. Moreover these records are maintained to keep tract of the person’s whereabouts and also to make sure that he pays his debts in the stipulated period as mentions in the credit related agreements.
Credits and associated financial dealings help in boosting a country’s financial growth. Credit history further helps to determine annual percentage rate of a country’s financial dealings.
Although it’s hard to keep your credit record clean, in today’s world it is almost mandatory.
Credit is believed to determine the borrowing capacity of an individual or company. Credit history is the record of someone or their organization’s financial dealings based on credit.
It is an account of their past borrowing and repaying. It also contains facts about late payments and bankruptcy, if there is any.
A credit reputation can also be used as an alternative to credit history. Credit history is generally maintained by credit bureaus set up in several countries.
When a customer interested in obtaining credit applies for credit from a bank, whether it is a nationalized bank or private bank, his personal inputs are forwarded to these credit bureaus.
From time to time these bureaus updates the status of the credit holders’ accounts, cross checks their personal information, like their address or contact numbers and records even the change of names, if there is any.
All these detailed information are required to understand the applicant’s credit worthiness. Moreover these records are maintained to keep tract of the person’s whereabouts and also to make sure that he pays his debts in the stipulated period as mentions in the credit related agreements.
Credits and associated financial dealings help in boosting a country’s financial growth. Credit history further helps to determine annual percentage rate of a country’s financial dealings.
Although it’s hard to keep your credit record clean, in today’s world it is almost mandatory.
Consumer Credit
The most fascinating thing about Credit is it allows consumers to finance transactions without having to pay the full cost of the total billing at the time of the transaction.
It is helpful because the consumers could buy the product in credit form and could pay it according to the deal. The most common means of consumer credit is a credit card account issued by a bank.
Now a days mostly each and every financial institution have given this opportunity to the customers. Merchants may also provide financing for products which they sell.
Banks may directly finance purchases through loans and mortgages in that case small sources business persons are getting real help for outsourcing their product and not wasting their total gross amount.
It is well protected in federal and state statutory laws. These laws protect consumers and provide guidelines for the credit industry.
Different countries have issued different rules to maintain various statutes regulating consumer credit.
The Uniform Consumer Credit Code) has been adopted in eleven states and Guam. Its purpose is to protect consumers obtaining credit to finance their transactions, so that while availing this credit system adequate credit is provided to the consumers, and also to govern the credit industry in general good condition.
Laws are there in the name of Consumer Credit Protection Act which regulates the consumer credit industry, it helps the creditors to disclose credit terms to consumers so that there might not be any hidden pros and cones.
The Consumer Credit Protection Act also protects consumers from big bite loans, restricts the lucrative use of wages, and established the National Commission on Consumer Finance to investigate the consumer finance industry so that it can run credits
It is helpful because the consumers could buy the product in credit form and could pay it according to the deal. The most common means of consumer credit is a credit card account issued by a bank.
Now a days mostly each and every financial institution have given this opportunity to the customers. Merchants may also provide financing for products which they sell.
Banks may directly finance purchases through loans and mortgages in that case small sources business persons are getting real help for outsourcing their product and not wasting their total gross amount.
It is well protected in federal and state statutory laws. These laws protect consumers and provide guidelines for the credit industry.
Different countries have issued different rules to maintain various statutes regulating consumer credit.
The Uniform Consumer Credit Code) has been adopted in eleven states and Guam. Its purpose is to protect consumers obtaining credit to finance their transactions, so that while availing this credit system adequate credit is provided to the consumers, and also to govern the credit industry in general good condition.
Laws are there in the name of Consumer Credit Protection Act which regulates the consumer credit industry, it helps the creditors to disclose credit terms to consumers so that there might not be any hidden pros and cones.
The Consumer Credit Protection Act also protects consumers from big bite loans, restricts the lucrative use of wages, and established the National Commission on Consumer Finance to investigate the consumer finance industry so that it can run credits
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