Credit scores are meant for the lenders to make their lending decisions easier and quicker. Credit unions or banks, lending you the money, want to know if you would be able to repay it. This requires looking back at your borrowing history which tells how likely it is for you to default on your loans.
Prior to credit scores, lending companies had to look at the credit reports page by page, evaluating borrowing history of each individual. Reading through those reports wasn’t just time-consuming but also inefficient. With this method, Lenders would also miss out on important and sensitive details which causing troubles for the company.
With credit scores, it’s the computer doing all the calculations using the same information but spitting it out as a score that’s easier to evaluate.
But it’s not just the lenders who benefit from credit scores but also the borrowers. For instance, many financing companies have already mentioned the minimum credit score required to apply.
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