Credit Scoring and Risk Rating

Credit scoring is a numerical representation of a person's creditworthiness, created by analyzing their credit history and financial behavior. Lenders use this score to assess the likelihood of repayment. Risk rating, on the other hand, evaluates the overall risk associated with lending to an individual or entity, considering factors beyond the credit score, such as income stability or industry conditions. Together, these tools help lenders make informed decisions about granting credit, determining interest rates, and managing potential losses.