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Credit is a relationship that involves creditor and borrower. When it comes to obtaining a loan or financing, who is more likely to be approved? The borrower you have information about or the one you don't have information about?

In other words, this is the importance of credit note during a credit operation. It is through this that the lender “gets to know” the borrower and knows whether they are able to take out a loan or a mortgage, and under what conditions. With it, the lender has more security to lend and can therefore offer a fairer deal, as the cost of the risk embedded in the transaction is better assessed.

And a credit rating is also good for the individual or company borrower. Armed with this information, they expand the number of institutions they can apply to.

Risk analysis is the most important stage in granting credit. Once a loan has been granted on the basis of an assessment of the credit rating of each consumer or company, sustainable credit is encouraged, with reduced defaults, which is good for the lender, the borrower and the country's economy.

As I said in the previous article, The credit rating, which varies between zero and one thousand, works like a financial resume. The closer it is to one thousand, the greater the borrower's ability to pay and therefore the lower the risk for the lender. There are those who promise to artificially increase the credit rating, but this is impossible. Only responsible behavior on the part of the consumer or company can improve the credit rating. All it takes is a few simple steps, such as making payments on time and paying your credit card bill in full.

To arrive at the credit score, several factors are taken into account, such as a history of bad debts, financial relationships with companies, up-to-date registration data and paying financial commitments on time. With regard to the latter, as positive information - sent by information sources such as financial institutions, suppliers of ongoing services and retailers - reaches the bureaus' databases, this information will gain weight in the credit score, promoting one of the objectives of the new Positive Registry, which is a fairer assessment of the credit borrower.

The weight of each piece of information included in the credit score is defined using a statistical model based on information about the behavior of consumers or companies.

Although the credit score is still a novelty in Brazil, in several countries it is so common and respected that it even applies outside the financial market. In the United States, for example, it is already relatively common for users of dating apps to publish their credit scores as an attraction. The example may seem like an exaggeration, but it mainly serves to illustrate the impact it can have on society as a whole.

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By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor