What is the Difference Between a Credit Rating and a Credit Report?

The risk report, also called credit report, and credit rating are compiled for each loan borrower, regularly monitored by banks and updated. All data on the credit rating of people who use credit cards, make any banking transactions, have valid loans or have closed their accounts for the last 5 years are included in the credit report. Credit rating is not available and is not formed if a person has not actively participated in banking transactions during the last 5 years.

What is the Difference Between a Credit Rating and a Credit Report?

Credit ratings are available upon request from the Credit Bureau. However, it should be noted that if such a request is made by unqualified persons, banks make double-checks on all transactions. The prepared credit report contains detailed information about the credit rating. When the Bank considers a loan application, the risk report is taken into account together with the credit rating when making the final decision on granting the loan.

What is Credit Report?

A credit report, which can be viewed as a summary of a person’s overall financial position, also includes a credit rating. The report can be created by a Bank or other financial institutions. The credit report provides detailed information on how a person makes payments, current loan amount, loan interest rates and payment schedule, and the amount of monthly payments. Thus, all these data help the Bank to find out whether a new loan can be granted to a person in accordance with the data of the report. During the preparation of the report, data on consumer loans, credit cards, existing accounts of the person, if any, are taken into account. The frequency of loan applications and the ratio of the use of available cash limits are also taken into account.

What is Credit Rating?

Credit rating, as part of the credit report, is formed by many factors in certain proportions. The value of the credit rating set by the banks varies from 1 to 1900 points. Accordingly, the higher the rating of the person applying for a loan, the higher the probability that the Bank will give a positive decision. Those who have never used a loan do not have a credit rating.

All changes in the credit rating affect the credit report both positively and negatively, depending on whether the rating is growing or falling. Some preliminary studies need to be carried out a few months before the application. So, the future borrower can improve its credit rating and, accordingly, the credit report indicating the possibility of obtaining a loan. This work can be done individually by individuals who request a loan, financial advisors or employees of the Bank to which you want to apply for a loan.

What Factors Determine the Credit Rating?

Timely payments on loans are the most important factor that increases the credit rating. This also includes: payment of debts on credit cards in an amount exceeding the amount of minimum payments (partial early repayment); exact compliance with the schedule of payments on the loan without delay of payment; regular reduction of existing debts; investments. In addition, regular transactions on Deposit accounts increase the Bank’s confidence in the client. Other factors that are taken into account when calculating the credit rating are the frequency of borrowings and the size of credit card limits.

A perfect example of how to improve your credit rating might look like this. Once you have closed all your debts, make a regular payment as a low limit credit card holder. The fact that you have not previously received loans, but have used small amounts of loans and made payments on time, will be among the factors that increase your credit rating.

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