Credit rating / score

The credit rating or score of  an individual is an indication of the credit worthiness of  an individual.  The credit rating is used by the lender to assess the risk of  lending money to  the individual or the business, in case of  a small proprietorship firm. Though the credit score may be adversely affected by factors which are not in an individual’s control, they often provide an accurate indication of  the financial health of an individual.

A poor credit rating /score indicates that the borrower is more likely to default on loan payments, and interest rates are usually higher for individuals with a low credit score. Often, a person with a low credit score may find it difficult to get a credit card or a loan. In such cases, the person has to request a friend or relative with a better credit score to co-sign  for the loan.

Credit ratings/ scores are usually calculated considering the financial history, whether payments have been made on time and also current assets and liabilities. For different types of  credit like home loans, car loans,  personal loans, credit cards,  the credit scores calculated may be different.