Credit Evaluation

Credit evaluation is done by the financial organizations to confirm the loan repayment ability of the prospective borrowers and the chances of default. The financial organizations get the credit evaluation reports of their clients from several other institutions like credit rating agencies that are founded for the purpose.
The credit evaluation reports provide information about several things. To start with these reports consist of the payment records of the prospective borrowers. These records are very important because they show the repayment patterns of the borrowers. At the same time, the reports provide access to the problems regarding any kind of credit that took place in the past.

The credit evaluation reports also provide a number of other information. The credit evaluation reports prove to be of great use to know about the present credit situation of the potential borrower and provide information about all the sources from where the borrower is enjoying loans and also about the liabilities at present. Agencies for credit evaluation are present throughout the world. In US the credit ratings or evaluations are done by three different organizations.
All these credit rating organizations use different methods of evaluation and results from these organizations may differ from each other to some extent.
The standards may be anything, but if the borrower has some bad credit history it is going to be reflected in the credit evaluation reports of the potential borrower. To avail a loan of any kind, a borrower should have a good credit record and rating.

Another important factor about credit evaluation is that this is done to provide a number of information to the lender. Now, the lenders want to have information about various risk factors related to the loan applicant before providing the loan. The credit evaluation organizations provide the lenders with those risk related information.

If the borrower has credit evaluation reports from all the three credit rating agencies, it can help the borrower to get the loan readily. The credit evaluations are also helpful for the borrowers because these reports help the borrowers to improve their credit history.

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Last Updated on : 27th June 2013

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