After Dr. Bawumia has spilled about implementing this policy, it has raised some people's eyebrows : the cynics, party - poopers and sourpusses are yammering about it, whereby they have labelled the policy as unadulterated turkey.

This enterprise proposed by Dr. Bawumia is esoteric, hence one may need to trip and animate its grey matter before being able to plumb the depths of it, for it's worth eyeteeth. This libretto will give an empirical and a posteriori of its sublimity.

In many moons ago, the ubiquitous crux which was preying on the Europeans, such that, it rendered the fluency and rhythmicity of their economy and marketing sector into katzenjammer was the inability to purchase astronomical items on credit.

In view of it, they instituted an American data analytics company known as Fair, Isaac and Corporation (FICO) in 1989 to give them that financial potency, hence the emergence of Credit - Scoring System.

Credit scoring is a statistical analysis performed by lenders and financial institutions to determine the creditworthiness of a person or a small, owner-operated business. Credit scoring is used by lenders to aid elect whether to extend or write off credit.

Credit Report isn't uniform to Credit Score, although both give an end of a borrower's credit risk _ but there is a gulf between them. A credit report can minute one personal information, credit account information, hard inquiries and public records like bankruptcies or liens. Credit bureaus anthologize credit reports.

Credit-scoring companies—like FICO and VantageScore—use information from one credit reports to compute one credit scores. Credit reports and credit scores are markers which countenance a financial institution to dissect one reliability for paying off the debt on time. The major grandness of the credit score is thus in the peril assessment of the individual or the asset – in this case, the person!

Credit scores were invented to make the process of evaluating credit swifter and more equitable for both lenders and borrowers. Today, most lenders use their credit scores to regulate creditworthiness. A Credit is lured by five categories ;

* Payment History (35%) : It details one track record of paying back one debt on time. This component encompasses one payments on credit cards, retail accounts, installment loans (such as automobile or student loans), finance company accounts and mortgages.

Public records and reports detailing such items as bankruptcies, foreclosures, suits, liens, judgements and wage attachments are chewed over also. A history of meteoric payments of at least the minimum amount due assists one score. Late or missed payments blemish one score.

* Amount owed or credit utilization (30%) : Divulges how acutely in debt one is and contributes to moulding if one can paw what he/she owes. If one has steep outstanding balances or is practically " maxed out " on someone's credit card, one credit score will be fazed negatively. A splendid rule of thumb is not to transcend 30% of the credit demarcation on a credit card.

Paying down an installment is looked upon with favor. For instance, if one borrowed ¢ 20,000 to procure a car and has paid back ¢5000 of it on time, even though he/she is being in a red still, a substantial amount on the original loan, one payment pattern to date, demonstrates accountable debt management, which appreciatively strikes one credit score.

* Length of Credit history (15%) : Refers to how protracted one has had and used credit. The more prolonged one history of responsible credit management, the streets ahead one score will be, because lenders have a convenient mileage to discern one repayment specimen. If one has paid on time, every time, then one will reckon particularly good in this sphere.

* New Credit/Inquiries (10%) : Connotes one has or is about to take on more debt. Opening many credit accounts in a fugacious amount of time, can be speculative, chiefly for people who do not have a long - established credit history. Each time one applies for a new line of credit, that application incorporates as an inquiry or a " hard " hit. When one rate shop for a mortgage or a car loan, there may be compound inquiries.

However, because one is surveying for only one loan, inquiries of this sort in any 14 - day period regard as a single hard hit. By contrast, applying for multifarious credit cards in an ephemeral period of time will count as multiple hard hits and potentially lower one score. "Soft" hits _ including, one personal request for one credit report, beseeches from lenders to make one " pre - approved " credit offers and those coming from employers - will not engulf one score.

* Credit Mix/Type of Credit (10%) : Concerns the " mix " of credit one access, entailing credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. One do not has to have each type of account. Instead, this factor considers the various types of credit one has and whether one use that credit appropriately. For an embodiment, using a credit card to purchase a boat could impede one score.

Lenders use credit scoring in risk-based pricing in which the terms of a loan, including the interest rate, offered to borrowers are based on the probability of repayment. In general, the more soaring the credit score (i.e 800 - 850), the better the rate offered by the financial institution.

As credit-scoring models have garnished with time, so has legislation designed to help insulate borrowers’ credit information. The Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA) are two such laws. The FCRA pitches in to preserve deets within credit reports accurate, fair and private. And the ECOA helps shelter borrowers from discrimination by lenders.

However, the pull of credit score is not merely restricted to those who seek credit. It can also facilitate one gets more prepossessing insurance options, and can even present a more responsible image of one in the eyes of prospective employers.

A small business’ credit score is hinged on information in its credit report, including:

I) Company information (including number of employees, sales, ownership, and subsidiaries).

II) Historical business data.

III) Business registration details.

IV) Government activity summary.

V) Business operational data.

VI) Industry classification and data
Public filings (liens, judgments, and Uniform Commercial Code [UCC] filings).

VII) Payment history and collections.

VIII) Number of accounts reporting and details.

Moreover, there is Credit Rating also - it petitions to companies, sovereigns, sub-sovereigns, and those entities’ securities, as well as asset-backed securities, and are graded on a lettered scale. Credit scoring models make up a picture of an individual’s relationship with credit, and scores will fluctuate (although, usually will not drastically change) among the three main credit bureaus (Equifax, Experian and TransUnion). A credit rating conditions both the interest rate for the repayment and whether the borrower will be approved for a loan of credit or debt issue.

It is therefore salient for lenders to use credit scores in order to enable them examine risk and automate credit decisions. For example, credit card companies may use one credit scores for :
1) Pre-approved Credit Offers : A credit card issuer that's marketing a credit card might send pre-approved credit offers to people who have at least a base credit score and meet other desiderata.

2) Credit Application Reviews : Card issuers will also often scan credit scores when people apply for a new credit card. The issuer might use scores to ratify or explode applications, set interest rates and determine the credit ceiling on licensed accounts.

3) Ongoing Credit Monitoring : Once, one gets a credit card, the issuer might monitor one credit reports and scores. Changes in one credit score could cue the lender to offer one additional credit accounts, send one promotional offers or modify one credit limit. Auto lenders, Mortgage lenders and other financial institutions use credit scores in homogeneous ways.

One can take steps to amplify his/her credit score. They include ; making payments on time, contracting one amount of debt, and keeping a healthy mix of credit, comprising revolving credit and non-revolving loans. The length of one credit history also plays a role in one credit score, so fight shy of closing accounts if possible. Modern credit-scoring models give lenders a fast and easy way to determine an applicant’s menace level for a loan. They also help retain lending practices square by ensuring these decisions are based on factors like payment history and length of credit history and not on personal factors like age and marital status.

At this juncture, the enactment of credit - scoring system will give tooth to people to enroll into extensive tradings without a litany of financial ramifications _ therefore, let all of us subscribe to this heavenly policy of Dr. Mahamudu Bawumia.