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Welcome to MHHW

Credit Scores

Credit scores determine if someone gets approved or declined on any type of credit.

In commercial terms, credit scores are defined as numerical expression based on a statistical analysis of a person s credit files, generated by a mathematical algorithm.

To be more precise, credit scores are determined on the basis of the certain amount of credit a person has taken.

His credit statements are compared with the accounts of other people applying for credit to the same financial body.

Bankers and credit card companies are termed as lenders who use credit scores to evaluate the potential risk while lending money to the consumers and to alleviate losses due to bad debt.

Credit scores are being used by the lenders to determine who qualifies for a loan and who does not, at what interest rate, and what credit limits they could lend the money to the person and in what time and what interest they could get their refund back.

There are lenders who sometimes build or create regression models that predict the amount of bad debt a customer may incur.

But it is really difficult and hard to predict about the debt return still it is done to have an idea in the future if this person is a high risk or worthy of future credits.

Lenders usually look for higher number as we have seen that people with highest score get the lowest rate of interest.

Different countries use different techniques to make credit scores and similarity is found between Canada and USA. But the system is said to be better in Australia.

Credit History

Credit according to the financial experts, is a contractual agreement in which a borrower receives something of value at a particular point of time and agrees to repay the lender at some later date.

Credit is believed to determine the borrowing capacity of an individual or company. Credit history is the record of someone or their organization s financial dealings based on credit.

It is an account of their past borrowing and repaying. It also contains facts about late payments and bankruptcy, if there is any. A credit reputation can also be used as an alternative to credit history. Credit history is generally maintained by credit bureaus set up in several countries.

When a customer interested in obtaining credit applies for credit from a bank, whether it is a nationalized bank or private bank, his personal inputs are forwarded to these credit bureaus.

From time to time these bureaus updates the status of the credit holders accounts, cross checks their personal information, like their address or contact numbers and records even the change of names, if there is any.

All these detailed information are required to understand the applicant s credit worthiness. Moreover these records are maintained to keep tract of the person s whereabouts and also to make sure that he pays his debts in the stipulated period as mentions in the credit related agreements.

Credits and associated financial dealings help in boosting a country s financial growth. Credit history further helps to determine annual percentage rate of a country s financial dealings.

Although it s hard to keep your credit record clean, in today s world it is almost mandatory.

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