how creditworthiness is assessed for individuals
for individuals credit scores are the most common and simplest measure of creditworthiness credit scores are based on the information in a person s credit report and expressed as a three digit number typically ranging from 300 to 850 credit scores consider a number of factors and weight them in terms of importance in the case of fico scores the most widely used credit scoring system the weighting looks like this 1in general a score below 580 is considered poor while one between 580 and 669 is considered fair good scores begin at 670 very good ones at 740 and exceptional ones at 800 2someone who once had a good or very good credit score but now has a poor score could be considered credit impaired because payment history and amounts owed count for nearly two thirds of a person s credit score it is likely that something has gone wrong in one of those two categories payment history reflects whether they have been making their monthly credit payments on time so perhaps they have for whatever reason started paying late or missing payments altogether the amounts owed category is largely based on the person s credit utilization ratio which is the amount they currently owe as a percentage of all the revolving credit they have available to them for example if they have two credit cards with a combined credit limit of 20 000 and they owe 10 000 on those cards their credit utilization ratio is 50 credit scores reward lower utilization ratios and punish higher ones so it s possible that the person has run up much bigger balances than they carried in past again there may be a logical reason for that but their credit score will still take a hit if the individual can keep up with their bills and pay off a large chunk of their outstanding debt they should be able to restore their credit score over time and no longer be labeled as credit impaired in addition to credit ratings some companies have business credit scores also known as commercial credit scores they are computed by dun bradstreet equifax and experian 