What
Good Credit Means to You
Introduction to the Impact of a Good Credit
Score in the 21st Century
Although credit scores benefit a creditor,
insurer, or employer, they are also good for you—as
long as your score is high. Your good credit means that you
are less of a risk because you are less likely to default
on your loan. While your score truly is more of a predictor
of your behavior, it’s accurate enough that lenders
will often draw a line and stick to it, even to the exclusion
of a point below their boundaries.
What a Good Credit Score Means to You
Although the credit report and credit score
doesn’t include personal items like income, personal
preferences, employer, etc., it can tell enough about you
through statistics that a lender knows what you will do. Here’s
why: out of 10,000 people, only 110 with scores of 800 and
above will have delinquent payments, while 870 in the lowest
scores will be delinquent.
How do Credit Scores Work
How do the credit bureaus know that? Well,
the know that the delinquency rate of people in the 800+ category
is only 1%, and that 11% of the population falls into the
800+ range. Although only 1% of the population falls into
the 300-499 scoring range, a whopping 87% will be delinquent
on payments. A lender who takes a chance on the lower scoring
population will be charging higher interest. |