What is mean by credit rating?

March 10, 2013 5:26am CST
I have heard so manytimes this word credit rating.... What is this means .... How is it done?
1 person likes this
2 responses
@laydee (12814)
• Philippines
10 Mar 13
It is actually your ability to borrow and pay back borrowed money. It's used by financial institutions or the financial industry to rate someone's worthiness it terms of finance. The higher the rating, the trustworthy you are to be lent money. They have special computation for it and to increase it you must borrow and pay-off those debts without need of demand from the companies. In short, it's just how they assess a person's ability to pay his/her debts. Have a great mylot experience ahead!
10 Mar 13
Excellent description, but I'd like to change one thing in it. In my opinion, it's not an assessment of the ability to pay debts: it's an assessment of the risk involved in lending the money. A small distinction, I know, but an important one as it's used for precisely that purpose and - surprisingly often - having a lower credit rating is better. Lenders don't mind you struggling to pay back their loan because they can add tons of charges if you do: as long as it gets paid in the end, the harder it is for you, the better.
1 person likes this
• United States
11 Mar 13
I assume you mean credit score. A credit score determines a consumers ability to borrow certain amounts of money; get a certain rate on a credit card. It can affect buying a card, buying a house, or renting an apartment even. The FICO score is used by many credit lenders to determine if they will extend credit to you; (i.e. those pre approved credit card offers that come in the mail) It is calculated using your credit history that is inside your credit report. A credit score can range anywhere from 300 - 750 and amounts of debt can affect it severely.