Credit Scoring: How the bank gives a credit agreement.
To give their loan agreement, banks and credit agencies use Credit Scoring, the evaluation of risk-customers. Understanding how scoring works improves your chances of getting a loan.
The risk-client assessment allows banks to grant – or not – a loan.
For a bank, the risk management of credit is a fundamental aspect of their business. We do not lend to everyone, we need guarantees from credit applicants. The problem is that often these guarantees presented by the applicants are not sufficient, the bank needs more data to be able to decide to lend money, hence the need to scoring.
How to have guarantees when making a credit?
Needless to say, if you do not have the guarantees, your chances of getting credit are minimal. Guarantees, we know them: a salary in CDI, few refunds to make, a good health, to be young, to have rich parents, so on. How to get credit if you do not have collateral to present to credit institutions? We can not. We only lend to the rich, or rather, to those who can repay without problem.
The positive file
The new players in the credit market, outside the banking network, are in favor of the positive file, a bank can be: they instantly obtain valuable information that enables them to assess the risk of granting credit according to the profile of the bank. customer. To compensate for this lack of information, credit organizations rely almost exclusively on credit scoring, using advanced methodologies and software.
It is for this reason that in appearance someone who did not necessarily have the opportunity to obtain credit, who is unemployed without income can obtain a revolving credit to finance his work with a credit card Loren Gado by example. The score obtained by the credit scoring, the “score” said to the organization: this applicant has a minimal credit risk, despite the lack of main guarantee that the lack of income.
Advantage of scoring credit
This is a simple process, after entering information about you, the credit agreement is issued very quickly for most cases. This information complements the negative files of the Bank in France, and allows the banking institutions to grant loans more easily, provided you have a good score.
Disadvantage of scoring credit
The credit is dehumanized. With complex mathematical formulas, taking into account data and nothing else, you are repressed or accepted, without you being able to defend your project, your request, convince your banker.
It is for this reason that scoring credit is widely used in small consumer loans, revolver credits and credit cards. We are talking about small amounts here, where the time factor is essential: we had to automate the process of accepting credit. Credit scoring will be less important when buying an apartment or starting a business.
Risks and dangers of credit Calculation of the rest to live to obtain a credit
- All about bank charges
- Fraud credit with fake papers
The acceptance or rejection of a loan involves the risk rating of the client.
You’ve probably wondered what would make your bank give you credit. We are never sure, will our file pass? Banks, before responding to a credit application, make a statement of the financial situation of the applicant: it is the credit scoring, which allows the financial institution to estimate the risk of non-reimbursement.
Credit Scoring has great qualities for both clients and financial institutions. The main one is, in my opinion, the protection of our data, which should not be used to restrict our freedoms or flood us with aggressive advertising.