A system used to calculate the risk of granting a loan or the probability that it will be repaid. Each lender sets their own criteria based on historical evidence of good and bad customer characteristics. Some lenders will use this as an indication of the potential borrowers credit worthiness whilst others may rely on it completely so that a loan application may be accepted or rejected depending on the score.
An objective method of quantifying credit worthiness by assigning numerical values based on meeting established credit criteria.
A lender's way of assessing whether you are a good risk for mortgage purposes.
A generalised way of assessing the credit application, carried out by scoring the answers given on an application. It is important that there are no missing answers on an application otherwise the result for the question becomes a negative.
This is a way of working out the risk of not being repaid if money is lent. Points are awarded for the answers given by the potential borrower to a series of questions. A high score means that the risk of them not being able to repay is low.
Credit scoring is an unbiased way of deciding who should receive credit. By giving points based on the information supplied on the application form, the lender decides whether to give you credit. Your age, how much money you earn, how much money you owe and other factors are taken into account. Credit is given only to those applications which score a certain amount of points. This is decided by the issuer and varies from lender to lender.
Used by many banks and high street lenders to associate a number to certain elements of a loan application and credit search which added together give what is known as a credit score. In order for the borrower to be approved by the lender for a loan, they must reach a set score that the particular lender requires as a minimum.
Tool by which credit grantors evaluate the risk involved in granting credit.
One of the ways of assessing the credit application, carried out by scoring the answers given on an application. It is important that there are no missing answers on an application otherwise the result for the question can become a negative.
an unbiased way of deciding who should receive credit. Weights or scores are associated with your personal credit attributes, such as your income, debt and the time spent at your current address. These scores are added to give a total credit score. The total credit score is a prediction of how likely a person with that score is to default on their loan.
A technique used by the lender to assist in the assesment of your application.
Statistical techniques are used in Credit Scoring in order to measure the likelihood that an application for a loan will be a good credit risk. Lenders will use this system when making decisions about your application.
Mathematical formula developed by a credit scoring company to determine a person’s creditworthiness. Usually numbers are given in hundreds, such as 752 or 861. Included in the formula is how much debt the person has, how well the debt is serviced (see “debt service”), and what the person’s “debt-to-income ratio” is (see definition).
A system used by lenders to calculate the statistical probability that a loan they grant to you will be repaid. Different lenders have slightly different rules for assessing risk. Each lender works out the characteristics of 'good' and 'bad' customers, based on its past experience. Homeowners or borrowers with steady incomes may be considered less likely to default.
Assessing the ability of borrowers to be able to meet the mortgage payments from answers entered on a mortgage application form.
method of loan assessment carried out by scoring the various answers given on a loan application. Almost all loan applications are credit scored and as a result it becomes essential for all questions on any application to be fully completed. Missing answers on an application will normally result in the maximum negative score being allocated to that question.
Mathematically giving a numerical weighting to various financial factors in the borrower's credit history in order to determine risk of lending. (Usually called a FICO score- named for the company Fair, Isaac, & Company)
A statistical technique used to determine whether to grant or extend credit to a borrower. When performing credit scoring, a creditor will analyze a relevant sample of people (either selected from current debtors, or a similar set of people) to see what factors have the most effect on credit worthiness. Once these factors and their relative importance's are established, a model is developed to calculate a credit score for new applicants.
A quantitative approach used to measure and evaluate the creditworthiness of a loan applicant. A measure of profitability, solvency, management ability and liquidity are commonly included in a credit scoring model.
A process used by some, but not all, lenders to determine whether you are a good risk to offer a mortgage too.
Credit Scoring is the process used by most lenders to help them decide whether or not your loan application will be approved. Each piece of information you supply on your application will be given a score that reflects the lender's profile of an ideal customer. For example, you may be given a high score for earning over £30,000 a year, but given a low or negative score for earning less than £5,000.
a method, based on statistical analysis of applicant characteristics, through which lenders determine the applicant’s qualification for credit.
A system that assesses a borrower on a number of items, assigning points that are used to determine the borrower's credit worthiness.
A process by which credit bureaus summarize a borrowerâ€(tm)s credit history in the form of a score that many lenders use to evaluate a loan applicantâ€(tm)s creditworthiness. Deductible A set amount that an insured person pays out of his or her own funds to cover repairs or replacement of lost or damaged property.
Lenders often use a system called credit scoring to help them decide whether to lend to you. They ask a series of questions about you and your finances and score your answers. Depending on your score you will be accepted or declined. Debt Consolidation The process of combining outstanding debts e.g. loans, credit cards etc, into one loan.
A lender's way of assessing whether you are a good risk to lend a mortgage to.
A statistical system that is used to rate credit applicants according to various characteristics relevant to creditworthiness.
A process that uses recorded information about individuals and their loan requests to assess - in a quantifiable, objective, and consistent manner - their future performance regarding debt repayment.
This is a way in which a lenders assess whether you are a good risk to offer a mortgage to.
estimating the creditworthiness of applicants by statistical analysis
A process determing the credit worthiness of a consumer by calculating a score from negative payment history and socio-demographic factors of the consumer's environment including age, profession or monthly income.
Generically, credit scoring refers to the estimation of the relative likelihood of default of an individual firm. More specifically, this is a reference to the application of linear discriminant analysis to combine financial rations to predict the relative chance of default quantitatively. (See CreditMetrics Technical Document, page 57.)
Your credit score is based on all the information in your credit report. This information is converted into a number -- a credit score -- that the lender uses to determine whether you are likely to repay your loan in a timely manner. The scores used in mortgage lending are typically in the 300 to 900 range. A general guide is that the higher your score the better. But you should keep in mind that your credit score is just one of several factors that will be used to evaluate your mortgage loan application.
An objective methodology widely used by credit grantors to make credit decisions.
A method of determining whether or not you can be expected to pay your bills. Factors used to determine your credit score include total credit limit, number of credit cards, amounts owed, and promptness of payment.
An algorithm used to calculate a person's credit. This "Credit Score" claims to predict your ability to repay obligations and measures likeness of potential default.
A system used by lenders to calculate the statistical probability that credit they grant to you will be repaid. Different lenders have slightly different rules for assessing risk. Each lender works out the characteristics of 'good' and 'bad' customers, based on its past experience. Each answer you give on your application form will be given a rating. If the total 'score' is above a certain figure, your application is accepted. Because credit scoring is the key to different lenders risk management they do not easily reveal the precise details of how it works.
A technique based on probabilities used to assess the degree of risk exposure arising from a potential lending situation.
A method, based on statistical analysis of applicant characteristics, lenders use to determine the applicant's qualification for credit.
the process by which the credit worthiness is checked.
This process is used by most lenders to determine what level of credit risk you are. They use a scoring system based on credit history; good or bad, length at current address, security, employment, income and answering these questions gives them a score or Credit Rating. Mainstream lenders only want high scores. However there are lenders who will find credit to suit your score even if it is a poor credit rating. The majority of your credit history and suitability will be on a national credit database but it is up to individual lenders whether the risk is acceptable.
A technique used by the lender to assess the suitability of your application.
An empirically derived statistical analysis of information available in a credit bureau report that demonstrates, based on past credit history and performance, how likely an applicant will properly manager their credit.
Measures the risk associated with each credit applicant/ microborrower. Credit scoring is an automated system that assigns points for various credit factors, providing lenders with the ability to grade prospective clients and to calculate the risk of extending credit. In a microfinance context, the credit scoring method is modified to take into account a microentrepreneur's experience, character and capacity to repay. The final credit score is an overall measure of the creditworthiness of the credit applicant.
This is used to estimate the degree of risk involved in lending to a particular person.
carried out by credit reference agencies, credit scoring is a means of determining the risks that a particular applicant represents. By using a variety of different statistics the credit reference agency will produce a credit report used by a lender in order make a decision on whether to grant them credit.
Credit Scoring systems typically formulate values assigned to various credit criteria to create a "Pass/Fail" scoring "Model". Leasing applicant's scores are then compared to appropriate Models to determine credit acceptability. Credit Scoring Models are generally derived from the particular Lessor's historical portfolio performance with Lessee's of similar Type, Organizational Structure, Credit History, Size, Age, and Credit Bureau Rating, along with such other criteria as individual Lessor's choose to include. Lessor's Equipment preferences ordinarily result from that Lessor's particular experience, or inexperience, with various equipment types. Scoring criteria vary, predicated on Transaction Size, Type of Business, and Individual Lessor's particular preferences.
Most creditors use credit scoring to evaluate your credit record. This involves using your credit application and report to get information about you, such as your annual income, outstanding debt, bill-paying history, and the number and types of accounts you have as well as how long you've had them.
Banks and lending institutions use different scoring systems to decide your creditworthiness.
a formulaic procedure for assessing credit quality.
Credit scoring is a system which lenders use to assist in making decisions about granting loans. Credit scoring uses statistical techniques to measure the likelihood that an application for loans will be a good credit risk.
Apredetermined process of scoring which is used to approve or reject loan applications.
Credit scores are numerical values that rank individuals according to their credit history at a given point in time. Your score is based on your past payment history, the amount of credit you have outstanding, the amount of credit you have available, and other factors. According to Fannie Mae--one of the major investors in home loans, credit scores have proven to be very good predictors of whether a borrower will repay his or her loan.
A numerically based approach for evaluating a person or company's fability to repay a loan whereby a financial institution assigns different weight to various criteria to create their own "numeric score". As an example, somebody applying for a mortgage would be assigned X points for living in their current address for three years or more, Y points for their Beacon Score, Z points for their debit service ratio, etc. The Portfolio Plus Loan and Mortgage module allows financial institutions to create their own scoring system.
A method for predicting the credit worthiness of applicants for credit.
Tool used by credit grantors to provide an objective means of determining risks in granting credit. Credit scoring increases efficiency and timely response in the credit granting process. Credit scoring criteria is set by the credit grantor.