What is a credit scoring

Are you wondering what credit scoring is? It should be noted that this is a term related to banking. When is it used? What is its use in practice? What are the different types of scoring ?

What is a credit scoring

What is a credit scoring

It should be emphasized that currently banks have various methods that help them assess the ability and credibility of a potential borrower. However, this can not be surprising. Institutions thus protect their interests. It should be emphasized that a credit scoring is a popular method, among others. It is worth knowing that this is a way of assessing the credibility of a specific entity that is seeking a loan from a given banking institution. Usually, the result is presented in a punctual form. A person who has a lot of points does not have to worry about getting a loan. It is worth noting that we are dealing here with statistical tools. Many people will definitely be interested in the issue that credit scoring is also about determining credibility on the basis of a comparison of the profile of a particular borrower with other people who already have a loan. If someone has a profile similar to a man who repays his obligations in due time, it obviously works in his favor.

Types of scoring

It should be noted that we distinguish various types of this term. An example is behavioral scoring . This method consists in granting potential borrowers points based on the analysis of their previous “struggles” with financial resources. What does this mean in practice? In the simplest terms, it is simply an analysis of credit history. If someone’s conscience met and repaid his or her obligations, he or she receives the right number of points for it. An interesting variant is also application scoring . You can not fail to mention that it consists in awarding points on the basis of specific personal or property data. They are determined in a special card. After summing up, these points determine the degree of risk associated with potential borrowers. In other words, it often turns out that a given profile is considered risky by the bank. This is the case, for example, when someone changes jobs etc.

What data are taken into account by the banks

What data are taken into account by the banks

It should be emphasized that these are, among others, aspects such as occupation, education, housing status or even the district in which the borrower lives. In addition, these are also issues related to work or material assets. What to do to get the highest score? Certain issues are not entirely dependent on a given person – such as age. It can not be concealed that people who change their job, are relatively young or have documented income for relatively high sums are better perceived.

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