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Credit Risk Analysis Terminology

Simple Alliance, Kenya Limited


Credit Reports

A credit report refers to a record of your past repaying or borrowing.  The record includes your financial details such as:

  • Any bankruptcy claims
  • Late payments you have made
  • Your loan and bill payment trends
  • Your present credit amounts
  • Your monthly debts

Uses

Your credit report comes in handy in a number of important instances. Some potential users of credit report information include: 

  • Yourself
  • Third Parties

Yourself

For a number of reasons, you may seek to review the credit histories of third parties. Your understanding of the terms contained in credit reports will facilitate easier evaluation of third parties’ credit risk statuses.   

Third Parties

Basically, your credit report helps potential partners to determine whether you are a bad or good credit risk. They arrive at this conclusion after looking at your numbers. Some business partners who make use of your credit report include:

  • Potential lenders
  • Credit card companies 
Potential Lenders

When you apply for a loan or a line of credit, your targeted financial institution will seek to have a look at your credit report. 

Credit Card Companies

Credit card companies will normally seek to examine your credit report before issuing you with a credit card.  

Components

Your credit report includes categories of data such as:

  • Personal identifying data  
  • Credit history
  • Credit enquiries

Your Personal Data

The information you find under the Personal category includes:

  • Your name
  • Your address
  • Your telephone number
  • Your social security number
  • Your birth date
  • Your previous and current employers 

Your Credit History

Under Credit History, you find information about your bill paying history with entities you have received credit from. Such institutions include banks, finance firms, or mortgage firms. The credit information you find under this category pertain to each of your present credit accounts. Key data include:

  • The account opening date(s)
  • The account type
  • The amount of credit (loan) in each account
  • Your monthly payment amount 
  • Late payments
  • Missing payments

Report Enquiries

Under this segment, the names of all firms which have previously reviewed your credit report and granted you credit are listed. The names any other entity which was previously authorised to review your credit report are provided.  The Report Enquiries section also lists the firms that have previously been forwarded with your name and address so as to extend credit to you.    

Credit Report Terms

So as to make the best of it, you need to understand the term appearing on your credit report.  Some useful terms include:

  • Credit rating
  • Credit score
  • Credit reference bureau
  • Legal filings
  • Secured credit
  • Revenues
  • Unsecured credit

Credit Rating

This refers to the assessment of your risk of late payment. Your rating depends on factors such as legal filings and previous payment performance. 

Credit Score

This is a number that defines your creditworthiness. The number is generated by a computer. Aspects that influence your credit score include your:

  • Payment history
  • Outstanding debts
  • Credit history
  • Income

Credit Reference Bureau

This is an autonomous firm that gathers data about consumers and businesses’ credit transactions. The bureau provides this information to credit grantors so as to enable then evaluate potential clients’ risks.     

Legal Filings

This is a summary of statutory judgements, bankruptcies, lawsuits, and liens.

Secured Credit

This refers to a line of credit that is supported with collateral, for example, assets, cash reserves, or inventory.

Revenues

These are your yearly sales figures.

Unsecured Credit

This line of credit is not supported by any particular collateral.

 

A credit report is a summary of your fiscal details that is issued by credit reference bureaus. The report gives details of your past credit transaction, your repayment trends, any defaulting, outstanding debts, your income, as your well as any bankruptcy claims you have previously lodged.  You, as well as third parties, could use credit reports.  Third parties could use your credit report to evaluate your credit risks based on various factors. You could study your own credit report so as to determine whether it is factual. You could as well study other’s credit reports so as to assess the third parties’ credit risks. Some useful credit report terms include; Credit rating, Credit score, Credit reference bureau, Legal filings, Secured credit, Revenues, and Unsecured credit.

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