What is credit scoring?

Credit scoring is a calculative system creditors use to help them determine whether or not they should give you a credit loan. Information about you and your credit payment history, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your credit accounts, is collected from your credit application and your credit report. Using a statistical program, creditors can compare this information to the credit performance of consumers with similar profiles as yours. The credit scoring system will award points for each scoring element that they use that will help them to determine if you are likely to repay the credit loan debt. The combined total number of score points is tallied together to create what is known as -- a credit score -- which loosely defined predicts how creditworthy is the loan borrower, that is, how likely is it that the credit loan borrower will repay a credit loan and make the payments on time when the monthly credit loan payment is due and payable.
 
Because a credit report is an important part of many credit scoring systems, it is very important to make sure that the credit report is 100% accurate before a credit loan borrower should submit a credit application.