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Credit Scores – What does it Mean?

By Janet Lacey
Published: Tuesday, May 14th, 2013

Credit score is a three digit number (generally) used to determine if a person is able to get loan and also the amount of the loan that person can get from lenders. But the main intention to score is safety of lenders and avoiding bankruptcy. The lenders determine the credit scores by using credit report of borrowers. The credit report is sourced from credit bureaus.

Who are Lenders?

There are various types of lenders, such as banks, credit companies etc. These lenders use credit reports to develop credit scores and thus verify the risk of lending money to the borrowers. The whole process not only allays the fear of losses that results from bad debts, but also evaluates customers whether they are capable of getting loan, at what interest rate or what will be the credit limit.

As already stated, there are various organizations such as, mobile phone companies, government sectors, banks- all those employ credit scoring system. Although, all of these organizations use some different techniques to determine the credit score, overall the scoring processes at various institutions are almost similar.


To find the origin of the credit score you have to be back in the 1980s when Fair Isaac and Company worked with the credit agencies and developed the three-digit score. Afterwards, many organizations adopted the system, but all these companies use slight different versions to that of first one.

How can be improved?

There is no need to say that a bad credit score may debunk you credibility to get a loan. So, you have to constantly think how to improve your credit score. In order to get better score, it is appreciable if you can always get in touch of your credit history. Two major factors plays very crucial role in this case, one of them is paying the bill late, while the other is avoiding the credit.

Most of the cases deal with the problem of paying the amount late. You have to keep in your mind that paying the bill on time works tremendously to make your score better. Many people have bad habit to avoid credit entirely which means that the person has no credit history and if it is so, it will be very difficult to get loan again in the future.

Hence, if you find any discrepancy or bad information in the credit report, it will be best if you directly contact to your credit reporting agency.

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