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Understanding the Various Purposes of Your Credit Score

By Ruth Racey
Published: Saturday, August 7th, 2010

The credit score is often perceived as a summary of your credit taking ability but not many people know that there are various purposes of this score. While most people are aware that their credit score decides their credit taking ability, many of these people are not aware that there are various aspects to this important score. The following paragraphs will elaborate on five important purposes of the credit score that most people are not aware of. 

Revenue Potentials and Collection Abilities are Calculated Based on Your Scores

Credit card companies monitor the credit score of the people they have issued cards to and based on these results they fund your credit cards. The amount of credit you and others in US are offered is based on the revenue potential which is derived from these scores. Collection agencies also use score information to decide if the person in questions has the ability to make payments or not. 

People who have missed a lot of payments or who are in debt are often given settlement offers but people who are in a position to pay off their loans are allowed to pay off their loans. Not many people know that settlement offers that are offered by collection agencies affect their credit taking capacity since they are paying the company a lower amount than they have taken.

Attrition Potentials and Fraud Potentials are Calculated Based on Your Scores 

Attrition offers is considered as a dangerous tool which credit card companies use to lure customers who stop using their company’s credit cards. Credit card companies use your credit score to understand if you are going to opt for another company’s credit card instead of their card and they then tempt people with offers and discounts. 

The fraud potential of a person is calculated using a sophisticated system and your credit score is used to calculate your fraud potential while you use a card. While buying items through a credit card the system that is accepting the payment will use this information to understand the risks and then decide if your payment should be accepted or declined. This process takes a maximum of two minutes and a declined credit card usually implies that the card can be misused. 

Bankruptcy potentials are Calculated Based on Your Scores 

Scores are also used to calculate if you are likely to apply for personal bankruptcy or not. People who are likely to apply for this option are often refused credit.

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