What Is Credit Scoring

Updated on July 21, 2020 · By Ahmad Nasrudin Tag: Personal Finance

Credit scoring is statistical modeling to produce your credit score, which represents your creditworthiness. It includes various variables, such as:

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Historical total debt and timely payment. Late payments hurt credit scores.
The amount of debt you get relative to the credit limit. The higher the debt, the worse your credit score.
Long track record of your credit. If you are a new applicant, the credit score is usually low. Lenders cannot track your historical ability to pay.
The number of new credit applications. If you apply for credit for some new loan, it negatively impacts your score.
Current number and type of credit account. If you have several loans (such as bank loans, mortgage payments, and credit cards) now, it decreases your ability to pay, so your score will likely be low.

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