What is a Credit Score?
Are you planning to apply for a loan or a credit card? Whether you’re a first-time borrower or not, you will need to submit your information to the lender you’re planning to apply from. This will serve as their reference to check your credibility for a loan.
But what does it take for you to get approved?
One important information that a lender needs from you to determine whether you’re eligible for a loan is your credit score or the number assigned to an individual’s creditworthiness based on credit history and other several factors.
A credit score is based on how a borrower manages their loans from lending entities such as banks, cooperatives, mortgage companies, digital lenders as well as employers. Creditors use this as a reference to know if the potential borrower is financially stable and how reliable they are in paying their loans or whether they are a good payer or not.
When you have a good credit score, you have the advantage to be approved for a credit and it will make your borrowing experience easier, faster, and with better rates. That is the significance of a credit score and not just in applying for a loan, but also in matters such as renting a place or applying for a job.
In building a good credit score, a borrower needs to have a good credit history or loan repayment record. It is a compilation of a person’s borrowing information including their payment history to credit accounts from various sources such as banks, credit card companies, collection agencies, and government.
Aside from payment histories and credit accounts (existing, closed, and inquiries), credit history is composed of identity information, public records like property purchases, foreclosure, and derogatory evaluation such as bankruptcies, tax liens, and court judgments.
All information from your credit history will be computed by a credit bureau that will build your credit scoring.
Credit Information Corporation
In the Philippines, one corporation that provides a credit information system is the CIC or the Credit Information Corporation. Established through the Republic Act No. 9510 or known as the Credit Information System Act, the CIC is the one responsible for collecting loan and credit information with all financial institutions.
The CIC is proficient in reducing overall credit risks of financial institutions to establish a healthier and more stable financial system.
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