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Definition: Improve Credit Rating
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Wikipedia.org |
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A credit rating assesses the credit worthiness of an individual, corporation, or even a country. Credit ratings are calculated from financial history and current assets and liabilities. Typically, a credit rating tells a lender or investor the probability of the subject being able to pay back a loan. However, in recent years, credit ratings have also been used to adjust insurance premiums, determine employment eligibility, and establish the amount of a utility or leasing deposit.
A poor credit rating indicates a high risk of defaulting on a loan, and thus leads to high interest rates, or the refusal of a loan by the creditor.
Personal credit ratings
In countries such as the United States, an individual's credit history is compiled and maintained by companies called credit bureaus. In the United States, credit worthiness is usually determined through a statistical analysis of the available credit data. A common form of this analysis is a 3-digit credit score provided by independent financial service companies such as the FICO credit score. (The term, a registered trademark, comes from Fair Isaac Corporation, which pioneered the credit rating concept in the late 1950s.)
An individual's credit score, along with his or her credit report, affects his or her ability to borrow money through financial institutions such as banks.
In Canada, the most common ratings are the North American Standard Account Ratings, also known as the "R" ratings, which have a range between R0 and R9. R0 refers to a new account; R1 refers to on-time payments; R9 refers to bad debt.
The factors which may influence a person's credit rating are:
• ability to pay a loan
• interest
• amount of credit used
• saving patterns
• spending patterns
Wikipedia, the free encyclopedia © 2001-2006 Wikipedia Contributors (Disclaimer)
This article is licensed under the GNU Free Documentation License.
Author's Bio
This definition is part of a series that covers the topic of Debt and Debt Consolidation. The Official Guide to Debt and Debt Consolidation is Leo J. Quinn. Leo J. Quinn, Jr. has been teaching and motivating people all around the world to get out of debt as quickly as possible. His best-selling book, “How To Own Your Paycheck Again”, has transformed literally thousands of financial lives. He also authors a lively weekly newsletter and is a much sought-after speaker for self-help and marketing seminars. One of Leo's most important goals is to help people improve their overall attitude about money or their "Moneytude" as he calls it.
Additonal Resources covering Debt Consolidation can be found at:
Website Directory for Debt and Debt Consolidation
Articles on Debt and Debt Consolidation
Products on Debt and Debt Consolidation
Discussion Board
Leo J. Quinn, The official Guide to Debt and Debt Consolidation
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