Thursday, December 7, 2006

What Is A Credit Rating?

A credit rating is a formal appraisal of an individual, corporation, autonomous governments, conglomerates, administrative and financial organizations, or even a country, evaluated on the basis of past financial transactions and present assets and liabilities. From a credit rating a credit granter or a financier can evaluate the ability of a borrower to repay a loan.
In the United States., for a personal credit rating, a credit agency studies the financial statistics of an individual and allots an individual a 3-digit number called the FICO credit score. Such agencies are called credit bureaus -- companies that assemble and keep a record of the credit history of an individual. In U.K., these bureaus are referred to as the credit reference agencies. Generally they charge a fee for allocating a credit score. If the information they furnish in the credit report is found to be false and detrimental for an individual, they can be litigated for slander.
The principal credit bureaus in the United States are Experian, Equifax, and TransUnion, while Experian, Equifax, and Callcredit are the principal credit reference agencies in the United Kingdom. According to Canadian Imperial Bank of Commerce, the major credit bureaus for individuals are Equifax, TransUnion and Northern Credit Bureaus in Canada. The leading global credit rating agencies are Moody's, Standard and Poor's and Fitch Ratings.
Managing a good credit score is important, especially when you are planning to take a loan or to buy a big automobile, or real estate, or renting an apartment, or even making arrangements for a vacation. Investors consider a low credit rating as the sign of a high risk of non-payment of a debt. Thus they tend to charge exorbitant interest rates.Moreover credit ratings are nowadays used to adjust insurance premiums, to ascertain the amount of a utility or leasing deposit, and even to corroborate an individual’s eligibility for employment.