ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Credit scores are designed to predict future risk and are not intended to measure a person’s financial health or ability to repay a loan. Credit scores are essential, but they are just one-factor lenders consider when making a lending decision. Other factors include income, employment history, and collateral.

Detailed explanation-2: -Credit scoring models generally look at how late your payments were, how much was owed, and how recently and how often you missed a payment. Your credit history will also detail how many of your credit accounts have been delinquent in relation to all of your accounts on file.

Detailed explanation-3: -Credit risk is a measure of the likelihood that a borrower will pay back a loan. Credit risk is a factor in lending decisions. Credit risk is determined by various financial factors, including credit scores and debt-to-income ratio.

Detailed explanation-4: -A credit risk score predicts the probability that a consumer will become 90 days past due or greater on any given account over the next 24 months. A three digit risk score relates to probability; or in some circles, probability of default.

Detailed explanation-5: -A credit score can range from 300 to 900, with higher numbers indicating a better score. Approximately 35% of the score is based on payment history. Approximately 30% of the score is based on outstanding debt. A good guide is to keep your credit card balances at 25% or less of their credit limits.