Credit Rating Scale – What Is It?
Credit rating scale is an important concept which will help you understand future financial decisions made by your credit lender. A the credit rating scale is a 3-digit number generated through a mathematical formula using the information identified within one’s credit formula. One may get up to three different credit scores from the major credit bureaus. Credit rating scale is used to determine the likelihood of an individual paying back his or her loans. There are many factors which have direct effect on rating scale. The credit bureaus issuing these scores use various techniques to arrive at a score. Those techniques are based on individual financial information from the credit report of the user. This is usually the main factor in determining credit rating scale. Credit payment history, including if this person was able to return all of the money borrowed on-time and in-full is another primary factor? Other factors affecting credit score estimation include:current debts, length of credit history, debt-type mix and how often the individual applies for new credit cards or loans. Credit rating scale is calculated from financial history as well as current assets & liabilities. However FICO (Fair Isaacs Corporation) scores are generally used everywhere.
Explanation of Credit Rating Scale Chart
USA credit rating scale is an evaluation of a borrower’s ability to repay debt and is prepared by a credit bureau at the request of the lender. Many people use a personal credit rating scale of 0-9. This credit rating scale has each number preceded by either an ‘I’ (installment credit) or and ‘R (revolving credit). In this system 0 means new to credit world which whereas 9 indicates that it is a bad decision to give you the loan.
Consumer credit rating scale is most important and many banking institutions uses a number of ranking systems such as the FICO rating system to calculate it. Scores range from 300 to 850. If the rating is 580 to 619 then it will consider you as a high risk and your interest percentage will likely be relatively high. If the credit rating is between 620 to 679 are seen if you become a medium risk and medium interest rates are usually recommended on your loans.
A rating among 720 to 799 is very safe and you can borrow a greater loan amounts along with having lower loan rates and low monthly payments. When the rating is up to 800 or more you are a very low credit risk and most lenders will loan large amount with very low interest.
Ways to Improve Your Credit Rating Scale
Personal credit rating scale is checked by banks when applying for bank loans. If the scale is good then it will be helpful for you to get the bank loan and the interest rate is low for you. On the other hand, having a poor rating it is so risky for the banks and you will pay more to get the loan. To improve your credit rating scale one should monitor his credit report regularly. Pay over monthly payment on-time and should service many lines of credit to boost one’s score. One’s debt should not exceed his income beyond 30% of his limit. To get superior credit rating scale, you cannot pay all of your debt off.