10 questions answered about credit score (score)

1. What is the “score” and how does it work?

The credit score is a numerical index between 300 and 850, which creditors use to find out if the applicant is paying their debts and also assess whether or not it is worth lending money. “The score only uses information from public records – which do not need to be communicated to the consumer – or from information contained in Serasa Experian’s own records – which have already been communicated or authorized by the consumer”, he explains. Vander Nagatasuperintendent of consumer information at Serasa Experian🇧🇷

2. What is the score for?

“Its purpose is to help consumers and companies to do business on credit, with lower cost, greater agility and security. The grantor is the one who decides whether or not to grant credit or carry out business and, for that, uses the score together with other tools”, says Vander Nagata. That is, it is a good way to raise capital to buy an apartment, open a business or finance a new project, for example.

3. Who uses this service?

“They are users of the commerce service, banks, finance companies and service providers in general, who, by knowing the probability of default of a certain group, will be able to define better prices and payment conditions according to the consumer’s profile”. This means that creditors use the score to check the investment risk in that person, in addition to checking what types of advantages can be applied in each case.

4. What counts towards the score?

Usually, the score is composed of registration, negative and public information that exists, such as protests, bad checks, financial and bank pending issues, lawsuits, address, age, whether you have a shareholding and even public research on debt. “Each of this data is analyzed in a particular way by each bank”, emphasizes financial educator Patrícia Lage, author of the book Bolsa Blindada.

5. Can I have access to this information?

“Consumers can freely access the existing information in the database about them, including those used in the calculation of the score, and can challenge them and request their correction or cancellation”, elucidates the superintendent of Serasa Experian.

6. What is the advantage of having a good score on the score?

“The score can make it possible to grant credit with different interest rates according to the profile of each borrower. This allows consumers who differ from the market average to negotiate better commercial conditions, for example, more appropriate (fair) interest rates for their profile”. Translation: the better the score, the better the loan terms.

7. What counts towards increasing points?

“The result of the score is dynamic and can change, for example, if the consumer updates their data at Serasa Experian or is negative”, stresses Vander. Two factors help a lot in this result, in addition to bringing benefits to your financial health: paying debts on time and settling (or negotiating) overdue debts that have not been paid.

8. Are good numbers synonymous with released credit?

“Improving the score is not directly linked to obtaining credit, as the decision is always made by the company that will grant it. It is possible, for example, for a person with a very low score to receive a sought-after credit, if that is in the interest/understanding of the grantor”, emphasizes the superintendent of Serasa Experian. As each company can stipulate its own requirements, it is difficult to generalize the granting of credits for each person.

9. How are banks calculating risks?

“When calculating risks, in accordance with the rules, banks have to take into account some variables: the probability of default (PD), which means the chance that the borrower does not honor its debt, the bank’s exposure default (EAD) and loss upon default (LGD)”. Therefore, in addition to the score, the bank or company you are applying for the credit will also analyze and weigh these variables, which can influence positively or negatively.

10. What measures can be taken for payment compliance?

A good way to understand how collection works is to understand, first, how the concession works: “it is this (allocation of resources according to risks) that determines good banking regulation, in terms of risk regulation: good payers, smaller resources are needed. Riskier customers, greater resources”. If you are a lower risk customer, it may not be necessary to declare any asset as payment guarantee, for example, which is common for riskier customers.