What is credit rating

noun an estimate of the ability of a person or organization to fulfil their financial commitments, based on previous dealings.

What is meant by credit rating?

A credit rating is a quantified assessment of the creditworthiness of a borrower in general terms or with respect to a financial obligation. Credit ratings determine whether a borrower is approved for credit as well as the interest rate at which it will be repaid.

What is the purpose of a credit rating?

It helps determine the probability that you'll pay back the money that was borrowed, as well as the risk you pose to a lender. Banks typically base the terms of a loan off your credit rating or credit score, therefore, the better your credit rating, the better the terms of your loan.

What is a good credit rating?

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.

How to determine credit rating?

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.