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Written by CreditRegistry

What is a credit score and why is it important?

A credit score plays a key role in a lender's decision to offer credit. Factors considered in credit scoring include repayment history, types of loans, length of credit history, and an individual's total debt.

A credit score is a risk assessment tool used by lenders to determine an individual's creditworthiness. It is statistically developed and summarises all of the information relating to your credit history. Typically it is a 3-digit number between 0 and 999; the lower the score = worse the credit performance (the higher the risk) and the higher the score = better performance (the lower the risk).

Credit scoring systems are not only used to vet applications for credit, but sophisticated lenders also make use of credit scoring throughout the credit lifecycle (marketing, new business, account management and collection).

What is a SMARTScore?

SMARTScore is Nigeria’s first credit score to help lenders make risk decisions with speed, ease, automation, and convenience.

Millions of people want credit to help improve their lives, but lenders have limited funds and so naturally want to minimize their risk. They want the best customers, fast and at the lowest possible cost.

Lenders will have a SMARTScore threshold value (the “cut-off”). If your score is below the cut-off (you get declined); if above the cut-off (you get accepted and can get the loan). In an ideal world, the higher score, the better credit deals you can get such as lower interest rates or higher amounts of credit.

Your SMARTScore helps in the following ways:
1. Using the SMARTScore is an objective approach that is not vulnerable to the individual prejudices that can influence human credit officers.
2. A credit scoring system is an automated decision tool; it allows lenders to lend on a large scale without the need to recruit hundreds of credit vetting officers.
3. Your credit score is a dynamic measurement meaning that it will change over time as a result of changes to your credit file and the information that you provide when making a credit application.

Your SMARTScore plays a key role in a lenders decision to offer credit. Factors considered in credit scoring include repayment history, types of loans, length of credit history, and an individual's total debt.

Order your credit report today and find out your SMARTScore.

Article written by CreditRegistry

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