Credit rating and score are interchangeable terms used to communicate the risk of default. Credit reports are maintained by credit reporting agencies and used to develop an indicator of risk, commonly referred to as a credit score in the US. The way a credit rating and score is calculated can vary, but generally includes factors such as credit history and debt repayment. Credit scores are purchased and used to determine credit access, finance charges, and credit terms.
There is no difference between a credit rating and a score. These are simply two terms that can be used interchangeably. You may find that the term credit score tends to be more popular in some places than others and vice versa. Both the credit rating and the score are used to communicate the risk of default of individuals or businesses if they are extended credit.
In the United States (US), how debt is handled matters because most people will need access to some form of credit in their lives. The availability of your options is generally determined by an evaluation of your credit histories. This information is contained in a document known as a credit report.
Credit reports are maintained, and generally sold, by credit reporting agencies. From the information contained in these documents, credit reporting agencies have a strategy for developing an indicator of risk, which may be known as a credit score or credit score. In the United States, this indicator is generally a number between 300 and 900 and is more common to hear it referred to as a credit score. In other countries, these numbers may be expressed in other ways and may be more commonly referred to as credit ratings.
The way a credit rating and score is calculated can vary from one credit reporting agency to another based on the formulas they use. However, there are certain credit report factors that commonly apply to formulas. These include examinations of who has extended credit to a person, how much credit was extended, and the amount of time it took the borrower to pay it back. Credit rating and credit score are also generally based on whether a debt has been paid off according to the terms described and the length of an individual’s overall credit history.
Credit score and rating are generally not provided with a credit report. These numbers usually have to be purchased, even if a person wants to know their own credit rating. When businesses buy a credit score, they can use it to determine a number of things.
First, it will likely be used to determine if a person will receive credit. Second, it can be used to determine what your finance charges or interest rates will be. Third, it can be used to establish the terms under which credit is extended. For example, those with low ratings and credit ratings may be required to have collateral while those with high ratings and credit ratings may not be subject to this requirement.
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