2023-09-16 11:22:37
In the financial world, credit score is an essential concept that can have a significant impact on people’s lives. In Colombia, this score is a crucial tool that influences the ability to access loans, credit cards, and other financial services.
Find out what a credit score is and how to improve it. | Photo: iStock
What is credit score?
The credit score is a numerical result that is derived from a detailed analysis of a person’s past financial behavior. Its main objective is to reliably predict how that person will behave in terms of his or her credit obligations in the future. In other words, it is a measure of an individual’s credit worthiness.
This credit score is developed through a statistical methodology that is based on the analysis of the information contained in people’s credit histories. This methodology takes into account some factors such as payment history, use of financial products, types of credit used and other relevant data.
Cristian Castillo, vice president of Product at DataCrédito Experian, explained to the Valora Analitik portal the key difference between credit history and credit score. While credit history provides information about a person’s past and present behavior in relation to their financial obligations, a credit score is expressed in a number.
The latter is used to estimate the probability that someone will default on their credit obligations in the future. In short, a credit score is a numerical score that summarizes credit history information and makes it easier to evaluate credit risk.
Before acquiring a loan, it is essential that you verify your debt capacity. | Photo: Getty Images
How does the credit score work in Colombia?
In Colombia, the credit score plays a fundamental role in making financial decisions. Credit and financial institutions use this score as a tool to evaluate the risk of granting credit to an individual. The higher a person’s credit score, the lower the perception of risk associated with giving them a loan or credit card.
The credit score in Colombia is based on a numerical range that goes from 150 to 950. The closer the score is to 950, the better the person’s credit rating. This means that they are considered to be at less risk of defaulting on their financial obligations.
The credit score in Colombia is made up of various variables, and some of the most important factors that influence this calculation are:
Payment history: This is one of the most critical components of a credit score. A timely and consistent payment history will have a positive impact on the score. Use of financial products: Responsible use of financial products, such as credit cards and loans, can increase your credit score. Length of credit history: The longer If a person has a positive credit history, the better their credit score will be.
It is important to note that the credit score does not take into account the record of inquiries in the credit history. In other words, the number of times a person’s credit score is checked does not directly affect their score. This allows people to check their own score without worrying about damaging it.
Credit score is a number that rates a person’s credit behavior. | Photo: Getty Images/iStockphoto
In summary, the credit score in Colombia is a crucial tool that influences people’s ability to access financial services. It is important to understand that this score is based on past financial behavior and is used to predict future behavior in terms of credit obligations.
*This article was created with the help of artificial intelligence that uses machine learning to produce human-like text, and curated by a specialized journalist from El País.
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