Credit Scoring 

Credit scoring is a statistical analysis performed by lenders and financial institutions to determine the creditworthiness of a person or a small, owner-operated business. Credit scoring is used by lenders to help decide whether to extend or deny credit. A credit score can impact many financial transactions, including mortgages, auto loans, credit cards, and private loans. KEY TAKEWAYS  Credit scores determine a person’s ability to borrow money for mortgages, auto loans, and even private loans for college.  VantageScore and FICO are both popular credit scoring models.  Lenders use credit scoring in risk-based pricing in which the terms of a loan, including the interest rate, offered to borrowers are based on the probability of repayment.  Credit ratings apply to corporations and governments, while credit scoring applies to individuals and small, owner-operated businesses.

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