Credit Scores Helping Lenders Estimate Potential Risk Finance Essay - Free Essay Example

Sample details Pages: 4 Words: 1248 Downloads: 5 Date added: 2017/06/26 Category Statistics Essay Type Argumentative essay Did you like this example? Credit scores is a grading of an individuals ability to repay debts and arising financial obligations within a specific time limit; its an evaluation of a person or business credit worthiness. It a tool normally used by firms and business that engage in lending activities i.e. banks, mortgage firms, insurances firms and guarantors among others. Don’t waste time! Our writers will create an original "Credit Scores Helping Lenders Estimate Potential Risk Finance Essay" essay for you Create order Credit scores have enabled firms, business, banks and other lending institutions to have vital information regarding their customers creditworthiness and therefore enable them to determine the kind of loans to issue them and the level of interest that can be charged to each borrower, it also enables them to reduce risk that are associated to each of the borrower. Credit scores are normally prepared by the lenders or by independent agents on behave of persons, firms, business and various debt issues. I agree to the idea that credit scores are a fair measure that helps lenders estimate potential risk. Lenders use these scores in calculating the amount of risk that are imminent; they also use it to minimize the level of risk and do evaluate who is eligible for a loan and at what level of interest. Lenders are in an aim of maximizing profit, and for this objective to be achieved, it is dependent on the amount of funds that have been borrowed. Lenders now are faced with dilemma; they have to lend much to earn more, but this objective is subject to the potential risk from borrowers they he have to use credit scores to evaluate which among the customers can bring much revenue, the use of scores before allowing one assess loan is a way of minimizing risk. An important function of credit scores is ensuring that those who borrow loans have the ability to repay as it due and therefore evaluate the confidence level a lender has on the borrower. According to Kerr Duncan (2008) individuals credit worthiness can be known through various aspects including the stock exchange market, financial records and transactions between other players in the credit sector, it is then used in projection of ones behavior in the future. An individuals credit score is an outcome of the various successive independent evaluation of his or her ability to meet outstanding obligations within the set time; it considers borrowing and repayment records, assets and liabilities held by a business. Information is derived from ones history financially to forecast how the same individual is likely to replicate the same in future. It is noted credit scores of persons keep changing either to betterment or otherwise depending on ones economical situations. Credit scores has been a better tool in dealing with the risk faced by lenders, it provide a better solution to the future risk in that most lenders will be having records of every borrower and their scores. It enable lenders determine the appropriate loans and the corresponding interest rates that can be offered to a borrower. Borrowers with poor scores will be avoided or if they are accepted their interest rates shall be punitive to gather for the high risk associated with them. Borrowers can improve their credit scores by paying the arising obligation on loans on time, ensuring that credit balance on credit cards are low and paying off debt rather that shifting them between credit cards. If one always pays his debt obligation within the credit period then he or she is likely to have a favorable credit score. With a good credit score one is likely to have favors from lenders i.e. risk against the lenders will be that low and the borrower can have relatively low finance charges. If an individuals credit score is poor may be because he or she normally defaults or meet arising obligations late, he or she is more likely to have unfavorable terms of credit, to the lender the risk is high and more likely to place high finance charges or even deny the borrower fully. For the credit scores to be more effective tool, methodologies used in calculating needs to be clearly spelt out. It should be noted out that the main role of credit scores is to criticizes and provide useful financial information on individuals, businesses and corporations that can be used to predict the future defaults and therefore averts damage. Credit scores firms need to be flexible and fit to the changing independent market. Kerr (2008) has that independent credit firms must flex to avoid market turmoil, and that credit score firms should develop and use models that touches all the necessary variables making the score. Firms owe to use comprehensive models to ensure the cases of defaults are reduced significantly. To ensure that credit scores are effective credit score firms themselves need to be effective and relevant to the point; they owe to continuously reform themselves to be at par with the dynamic financial market and hence the need to review the methods of calculating credit scores. In order to ensure that credit rating firms are effective in their scores, they should be held liable and accountable to the lending institutions, they can either take the whole liability or to the extent to which they are liable. There are several ways of evaluating a credit score and one famous is FICO- initially called Fair Isaac Corporation. FICO is used by most lending firms to evaluate the possibility that a customer will default. Research as proved scores as predictive in dealing with risk and uncertainty of borrowers; it has shown that most credit consumers have gained from the lower finance cost from credit firms merely due to credit scores. Although there have been critics to the credit rating firms, they are playing an important role ensuring that lending institutions get the valued information. At times the firms developing the credit score use outdated models that do not capture the current changing trends in financial markets therefore placing the lending institutions at risk. Such models have to be reviewed and developed to catch up with the new markets. In some situations credit firms have been said to collude with borrowers to defraud the lenders, such cases have to be dealt with accordingly to ensure such practices do not deter the objectives of credit scores. Even though many lenders use the FICO scores while making decisions on lending, they dont feel satisfied thus they employ their own strategy including evaluating the amount of risk associated with certain products, no unitary score is purely used but several are combine to meet a firms expectation. In conclusion credit scores are a fair measure in estimating potential risk from defaulters, as its seen; its contributing largely to the development of the lending institutions, boosting the confidence of those investing in the credit sphere. Credit scores minimizes the chances of future risk based on just scores but the same scores do not explicitly say that an individual is good or bad. With the shortage posed by the scores, it can be improved by developing a credit model that is effective and relevant in all the sectors and that can greatly help improve in averting defaults. The availability of scores has enable banks to know who qualify to have a loan and what amount at what level of interest rate. It seen also that credit scoring is beyond banks to consumer credit and landlords. The scores have seen firms come together and share information on customer creditworthiness and therefore it can be said that credit scores have been helpful in fighting risk.

Informative Speech The History of Pluto Essay - 1108 Words

Informative Speech: The History of Pluto Specific Purpose Statement: By the end of my speech my audience will be able to explain the history behind Pluto becoming a planet and in turn losing its planetary status. INTRODUCTION: Attention Getter: Growing up learning about the planets my first grade teacher told me, â€Å"My Very Educated Mother Just Served Us Nine Pies† was a way to remember the order of the planets. Mercury, Venus, Earth, Mars, Jupiter, Saturn, Uranus, Neptune, Pluto. Apparently now teachers teach it as, â€Å"My Very Educated Mother Just Served Us Nachos†. Come on what happened to pies, personally I prefer pies over nachos. Thesis Statement: With the advances in technology, scientist have opened the door to the discovery of Pluto,†¦show more content†¦Astronomer Clyde Tombaugh is the man credited for the actual discovery of â€Å"Planet X†. Nola Taylor Redd a contributor to Space.com in an article title Clyde Tombaugh: Astronomer Who Discovered Pluto writes, â€Å"When Tombaugh was hired in 1929, he joined the search for the missing planet. The telescope at the observatory was equipped with a camera that would take two photographs of the sky on different days. A device known as a blink compactor rapidly flipped back and forth between the two photographs. Stars and galaxies essentially remained unmoving in the images, but anything closer could be visually identified by its motion across the sky†. b. Jennifer Rosenberg in her article Pluto Discovered writes, â€Å"It took a year of detailed, painstaking work, but Tombaugh did find Planet X. The discovery occurred on February 18, 1930 while Tombaugh was carefully examining a set of photographic plates created by the telescope†. Tombaugh officially announced the discovery of the ninth planet on March 13, 1930. Internal Summary/Preview: After discussing the discovery of â€Å"Planet X† through the beliefs of Percival Lowell and the actual finding done by Clyde Tombaugh, we will shift to discussing how â€Å"Planet X† got the name Pluto. II. Upon discovering the new planet which was referred to as â€Å"Planet X† the staff at Lowell Observatory opened up the rights to naming the this new planetary object to the public. A. Eleven year old Venetia Burney Phair from England had suggested the nameShow MoreRelatedThe Rise of Politically Partisan Infotainment2039 Words   |  9 PagesFox News: The Rise of Politically Partisan Infotainment Consumers now have access to more information than in any other point in history, and are being subjected to partisan news on a larger scale than ever before. Partisan news outlets, such as Fox News and MSNBC tailor their broadcasts to appeal to the confirmation bias of their target audiences. Each network not only chooses which stories to run based on the interest of their target demographic, but also frames the facts in a way that leadsRead More Myth of Propaganda in the Balkans and Rwanda Essay6707 Words   |  27 Pagespretty easy to persuade the first group to kill the other†¦ for the sake of protection. The most effective way for the governments in the Balkans and in Rwanda to inspire fear and move their followers towards murder was to call upon the power of history and create tenable myths that could inspire intense nationalism and feelings of ethnic superiority. In his discussion about the function of myth, George Schà ¶pflin says that the political and intellectual elites of a society— those who control theRead MoreA Short History of Nearly Everything6112 Words   |  25 PagesA Short History of Nearly Everything is a popular science book by American author Bill Bryson that explains some areas of science, using a style of language which aims to be more accessible to the general public than many other books dedicated to the subject. It was one of the bestselling popular science books of 2005 in the UK, selling over 300,000 copies.[1] instead describing general sciences such as chemistry, paleontology, astronomy, and particle physics. In it, he explores time from the BigRead MoreA Short History of Nearly Everything6112 Words   |  25 PagesA Short History of Nearly Everything is a popular science book by American author Bill Bryson that explains some areas of science, using a style of language which aims to be more accessible to the general public than many other books dedicated to the subject. It was one of the bestselling popular science books of 2005 in the UK, selling over 300,000 copies.[1] instead describing general sciences such as chemistry, paleontology, astronomy, and particle physics. In it, he explores time from the

Economic Impact Of Terrorism On Terrorism - 1645 Words

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Taoism Essay Research Paper Taoism applied to free essay sample

Taoism Essay, Research Paper Taoism applied to mundane life # 8220 ; Practice not-doing and everything will fall into topographic point # 8221 ; . In Taoism this is the construct known as # 8220 ; wu wei # 8221 ; . Wu Wei is the pattern of making and not-doing. This construct comes from the theory of the Yin and Yang. The Yang, along with Wei, is the pattern of making. The Yin, along with Wu Wei, is the pattern of not-doing. One compliments the other, and each can non be entirely. The Tao tells people to pattern not-doing because it will convey felicity in their life. By not-doing, the Tao means non performing actions, which are unneeded and uncalled for. Peoples should merely take things as they come in life and they will populate a life full of felicity and pleasance. If you don # 8217 ; t interfere with the Tao and allow things take their natural class, everything will work out in your life. We will write a custom essay sample on Taoism Essay Research Paper Taoism applied to or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page # 8220 ; If powerful work forces and adult females could stay centered in the Tao all people would be at peace If you work against your Tao, you will neer happen felicity. The Sage patterns wu Wei. He teaches without words and performs without actions. He knows and hence does non talk. Many people mistake conceptual cognition for the map to the district. The Sage is our map to the Tao. He points his finger to demo us the manner, but does non truly state us what to make and how to pattern Taoism. Lao Tzu # 8217 ; s constructs of the Tao can be a usher to rational life. If one follows these beliefs he is guaranteed felicity in his life. However, it is really hard to follow the Tao, even though the instructions are said to be easy understood and easy put into pattern. The ground the Tao is so hard to hold on is because you can non cognize that you are practising it. The Tao is beyond all words. If you give it words, it does non be. It is unnamable. If you concentrate on the Tao, you will neer understand it. You can non believe about it, you must merely make it. This is really hard because people ever think about what they do, but this does non work with the Tao. You can non look for the Tao ; you can non listen for the Tao. You must merely accept the thought that it is ever at that place, omnipresent, and you can # 8217 ; t see it. This is all really of import because if one can non understand these first simple stairss in Taoism, they will be lost the remainder of the manner. In personal life, you should neer specify yourself. When you define yourself, you are really seting bounds on yourself. If a adult male defines himself as a physician, he is restricting himself to science. If a adult male defines himself as a vocalist, he is restricting himself to music. By restricting yourself, you are non leting yourself to see life to the full. Besides, you should neer specify any object because they will ever hold an antonym. If you define something as # 8220 ; good # 8221 ; so its antonym is defined as # 8220 ; bad # 8221 ; , when in world it might non be. When a adult male is about to purchase a auto, he will desire to purchase a company with a # 8220 ; good name # 8221 ; . He has defined one auto as # 8220 ; good # 8221 ; and the remainder are # 8220 ; bad # 8221 ; . When he realizes he can non afford the # 8220 ; good # 8221 ; auto he is unhappy. He has to purchase a # 8220 ; bad # 8221 ; auto. While driving his # 8220 ; bad # 8221 ; auto, he thinks about what people will state. He worries that they will non O.K. of his new purchase. If the adult male had non originally set such high outlooks of purchasing a # 8220 ; good # 8221 ; auto, he would non be upset with his state of affairs. By caring about other people # 8217 ; s blessing he becomes their # 8220 ; prisoner # 8221 ; . If you see things as they are, so you will be happy with whatever you have. If you see things through other’s eyes then you will never achieve the high goals you are setting. â€Å"In family life, be completely present†. All family members should always be there for each other. You should be completely present for the rest of your family, this way other members can talk to you whenever necessary. This gives a sense of security to the rest of the family. Parents should always be there for their children, children should always be there for their parents, and siblings should always be there for each other. â€Å"Because (the Sage) has nothing to prove, people can trust his words†. The Sage and the parental figures of a family should have this in common. Parents have nothing to prove to their children and therefore children always believe what their parents tell them. Parents do not have to impress their children and can therefore set an example. If parents cannot have this connection with their children, there is a guarantee of failure in the family. â₠¬Å"In work, do what you enjoy†. Most people hate their job. If you like what you do, you can wake up every morning with a smile, looking forward to the day of work that lies ahead of you. At your job you should not try to hold all the power. By not trying to be powerful, you are truly powerful. Also, in you work you cannot chase after money. You must do your work because you like it, not because you want the money. If you chase after money â€Å"your heart will never unclench†. When you have no desire for the money, you are at peace. You must â€Å"be content with what you have, rejoice in the way things are†. You mustn’t expect too much because you will never get what you want. â€Å"When you realize there is nothing lacking, the whole world belongs to you†. â€Å"In governing, don’t try to control†. As a leader, it is best if the people hardly know that you exist. As a leader, you must not be bossy and try to have all the power becau se the people will hate you and will not obey you. You must lead, not control. By pointing people in the right direction you are helping them. By telling them where to go, you aren’t letting them think for themselves. The best leader listens to their people. As a leader you must govern with tolerance and you must not have high expectations of your people because you will never get what you expect. You must govern a country with moderation for the best results. If you have weapons, your people will be insecure. If you have laws, your people will break them. If you do not desire common good it will become as â€Å"common as grass†. If a nation does not get involved with the affairs of others, it will be well respected by all other nations. â€Å"If you over esteem great men, people become powerless. If you overvalue possessions, people begin to steal†. Society should not define things because bad things will happen. If you overvalue possessions it is obvious that people will steal them because they are worth something to society. If everything had none or equal value, no one would steal anything because nothing would be more important than everything else. This is an extreme suggestion however, it is the only way for society to come together as a whole and have no one steal from others. â€Å"Let the Tao become present in your life and you will become genuine. Let it be present in your family and your family will flourish. Let it be present in your country and your country will be an example to all countries in the world. Let it be present in the universe and the universe will sing.†