Credit Scoring & Creditworthiness

A brief look at the importance of credit Scoring and creditworthiness in securing business loans and new financing

What is credit scoring and creditworthiness?Many businesses at one time or another, approach their banks or some other lending institution, to apply for a loan for whatever reason. Most of those businesses end up not getting the loan for any number of reasons. Two of the main reasons for them not getting the loan are their credit score and their credit worthiness.

There are a number of different elements that go into determining your credit score and your credit worthiness and one of the main ones is your credit history. Your credit history is a record of your past borrowing and repayments and also your late payments and any bankruptcy you may have suffered.

Your credit score is a number that acts as a rating and represents an estimated calculation of your level of credit worthiness based on a particular statistical model used to make this calculation. Your credit score is really an attempt to mathematically work out what the likelihood is, that a would be borrower will not be able to repay a credit obligation or any other type of loan over a given time frame. The information to be found in your credit report is what is used to determine your credit score.

When you go to your bank or other lending institution your credit score is used to help determine the risk involved in lending you money. It may be the one factor that decides whether or not you get a loan and it also helps in deciding what interest rate is applied to a loan, the amount of credit you will get, and how accounts are monitored.

Your credit worthiness should be viewed as a very important asset for both businesses and individuals that must be controlled. It is determined mainly by your credit history and your credit score. Your credit worthiness is also evaluated on a case by case basis. Depending on the size of the credit needed the lending institution may use other criterion to determine whether or not a loan is issued. Things like bank references and trade references are sometimes asked for by lending companies from businesses. For individuals they make look at your current financial situation or ask for some form of collateral.

It is very important that individuals and businesses make sure that they do everything to protect their credit worthiness. It is necessary that their credit report reflects their true situation and puts them in a positive light. It is also important that your credit score be checked to make sure that there are no errors found on it as this may be preventing you from getting that loan you need. Thus it is imperative that you pay your debts on time and that you do not miss any payments as these will be reflected on your credit history.

Credit scoring software for Excel.Our credit control software, Credit Controller can help you do just that by determining the creditworthiness of your customers. This Excel based credit analysis tool uses artificial intelligence combined with credit scoring techniques to produce a comprehensive credit report, recommending a credit limit and credit score for each customer.
Click here to learn more about Credit Controller.

Liz Pulliam Weston has done an outstanding job demystifying credit scoring, approaching it from the perspective of the consumer. This is a great book to get an insight into how your credit score effects your creditworthiness and your ability to secure loans.
Click here for more books on credit scoring and credit control from Amazon.