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. Read more...

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. Read more...

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 rates of retail loans secured by automobiles or homes. Read more...