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Asked a question 3 years ago

Which factors affect the credit rating and credit score? Also,what is short term and long term credit ratings?

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Credit rating agencies take many factors into consideration when they provide credit rating to an entity. The agency considers the entity’s past history of borrowing and financial obligations. It leaves a negative impact on rating if there are default loans or missed payments. If it seems that in the near future, entity can be economically efficient, the credit rating will be higher but if their borrowings will be negative then the credit rating will be low.A high credit score indicates a stronger credit profile and will generally result in lower interest rates charged by lenders. There are many factors that are taken into account for an individual’s credit score including payment history, amounts owed, length of credit history, types of creit and new credit. Credit factor can be better explained in the credit report.

A short-term credit rating reflects the behaviour of the borrower within a year. This type of credit rating has become the norm in recent years. Long-term credit ratings were more considered in the past. Long-term credit ratings predict the borrower’s of borrower of defaulting in future.