What is a credit score and why is it used?

Before credit scores, lenders manually looked through an applicant's credit report to determine whether to grant credit based their own unique criteria. Denial of credit could be based on any number of subjective

issues. Such as a consumer already holding too much debt or having too many recent late payments. Needless to say human judgment is prone to mistakes and a considerable amount of time is wasted on irrelevant factors. From a business perspective the benefits of avoiding personal opinion to make a decision is obvious. No more wasting time and no more putting effort into things that have little bearing on the applicant's ability to repay debt.

Credit scores are designed to help lenders assess risk more fairly by implementing consistent and objective criteria. Consumers also benefit from this method by taking irrelevant issues out of the equation. Evaluating only your past credit history and your current credit status, a lender is able to make an educated guess regarding your likelihood to repay your debt.