Sunday, April 21, 2019   03:47:46
Validation: Creating Trust
Credit Assessment Concepts

Credit Assessment Concepts

According to Investopedia, Credit scoring is a statistical analysis performed by lenders and financial institutions to access a person's creditworthiness. Lenders use credit scoring, among other things, to decide on whether to extend or deny credit. A person's credit score is a number between 300 and 850, 850 being the highest credit rating possible.
According to Wikipedia, A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the 
creditworthiness of an individual. A credit score is primarily based on a credit report information typically sourced from credit bureaus. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Lenders also use credit scores to determine which customers are likely to bring in the most revenue. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system. Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, landlords, and government departments employ the same techniques. Digital finance companies such as online lenders also use alternative data sources to calculate the creditworthiness of borrowers. Credit scoring also has much overlap with data mining, which uses many similar techniques. These techniques combine thousands of factors but are similar or identical.

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