Credit Rating

 A credit rating gives an idea of the borrower’s credit history and if he’s worth giving a loan too. Credit Score can be for an individual, business association, or a corporate firm, who are seeking to apply for a loan.

The credit assessment and evaluation are generally done by credit agencies. The individual or an organization seeking a credit rating can may have to pay the agency.

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Credit Rating

A loan usually consists of a hefty amount, and credit scores usually help the lenders to get an idea about the borrower. It determines whether the person would pay back the loan within the time of the loan agreement.

Individual with high credit rating is more likely to repay the loan in given time without any issues; a poor credit rating.

However, gives an impression that the person has faced issues in the past while repaying the loan amount, and might follow the same pattern in the future.

A person who has a credit rating with a poor credit score is not likely to get loan approvals than the ones with a good rating.

Credit Score is usually applied to corporate firms, business institutes, and government, while for individual’s credit score applies. The credit score of a particular individual is an outcome of his past credit history.

Many credit reporting agencies maintain this history. Experian, and Equifax are the most common. A credit score can range from 0-999 depending upon the reporting agencies.

Credit rating agencies use letter grades to evaluate ratings. The credit score scale ranges from AAA to C and D, AAA being excellent and ratings under BBB- being poor.

So anyone with grade rating below BBB is more likely to miss repayment or default on loans.

 

Why Are Credit Ratings Important?

Credit scores are of utmost importance as the rate of interest depends on it. A borrowing individual or an organization will strive hard for having a good credit rating to reduce the interest rate on their loans.

Credit History always keep on changing, they are dynamic, due to the latest data updates. One negative debt can affect your credit rating severely and bring down your good credit score.

It takes time to build up a good credit. A person who has a good credit but a short credit history gets low approvals, in comparison to the one with good credit and long credit history.

 

So in order to get a loan with lower rate of interest, maintain a good credit rating throughout.

 

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