About Your Credit Rating and Credit Score
Is Credit a Convenience or a Necessity?
Credit is both a convenience and a necessity in today's economy. An individual's credit rating, fairly or not, is used as an indicator of his or her level of responsibility. Credit cards like MasterCard and Visa enable the purchase of items over the Internet or the phone, they allow people to buy things without the need for carrying large amounts of cash, and they afford a certain amount of consumer protection. If for example, you purchase an item and for whatever reason, the item is not what it was advertised to be, your credit card company will allow you to dispute the charge.
All of these conveniences that the credit card provides come at a cost. This cost is called the interest rate, which usually is between 15% and 22%.
Credit Rating Derived from Credit History
A credit history is the record of each and every time a person has borrowed money, carried a balance or made a purchase on his or her credit card. A credit rating is the analysis of the credit history. The credit bureaus or credit reporting companies like Experian and TransUnion employ a rating system ranging from 1 to 9 -- with 1 designated the highest rating.
Credit Rating Point System
A score of 1 indicates that the person always pays on time. Two (2) means that the person is 30 days past due on payment. Three (3) indicates 60 days overdue etc. If a person's rating is 7, that indicates that the person is paying through a debt consolidation company or service, while an 8 means repossession and 9 bankruptcy.
This is precisely why debt settlement is preferable to debt consolidation.
Credit Score is an Amalgam
Credit reporting companies like Equifax and Fair Isaac Corp use standardized software to calculate your credit score while institutions like banks, credit unions and other lending institutions use more personal factors like employment history and age in determining your credit score.
 Back to Debt Relief Articles and Information
|
