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Auto Loans Terms: Credit History and Score

When applying for auto loans, it is very important that you should know all the terms and definitions that are associated with the lending industry as it helps in making an informed decision. There are several terms which matter a lot in auto loans and hold quite prominence and two of these terms are credit score and credit history.

Credit history: there are three different credit bureaus in America which are responsible for the credit, lending and payment records of all its citizens. These bureaus hold all the information one can have on the transactions of lending and borrowing of citizens. They contain payments, missed payments, time of payments, defaults, repossession cases if any and the amount of debt one has. Moreover, they also judge the person’s credit worthiness as to how good or bad he/she has been in paying back the taken loans. This means that they provide the information which allows lenders to judge whether the applicant can be trusted with the finances or not. A bad history signifies that the applicant can default o the loan in the future making him/her a credit risk.

Credit score: if a person says that the whole working of the lending industry is based on the credit score then it won’t be completely wrong. After all, even if it has fallen from its pedestal and people just use it to judge the interest rate; it still matters a lot and is always checked. This is the score that the credit bureaus rate on the files that they have on applicants. When the lenders enquire regarding an individual, they are shown the person’s credit record along with their credit score as to what the bureau thinks they fair on the repayment meter. A high score signifies good record with few problems and a low score signifies a lot of problems.

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