Why Credit Scores Are Beneficial
Credit scores provide an objective measure of how you manage credit and your credit risk. As an objective measure, there are benefits not only for lenders, but also for borrowers.
Borrower's benefit by being considered for credit based on real aspects of a person's ability to repay the debt rather than a lender's personal feelings or biases. Since the objective measure does not include race, religion, national origin or marital status, consumers can be evaluated on the factors that matter. In this manner, credit scores are good measures of credit worthiness.
By using credit scores, loan decisions can be made almost instantly. This, of course, is aided by the internet allowing the almost instant transmission of a person's credit score. For the consumer, these means not having to wait weeks about a mortgage decision, being able to get instant credit at retail stores, or get a new credit card almost instantly through a bank or online.
For borrower's the credit score also allows them the correct their past credit mistakes. Since the credit report changes as the information about you changes, a past problem with credit is not the single factor that disqualifies you from credit. You can essentially erase bad credit problems. For example, I declared bankruptcy several years ago and this had a tremendous negative impact on my credit score. I basically had to start from scratch. Now a few years later, my credit score is in the mid 700's (a very good credit score). While the bankruptcy is still on record, my demonstrated ability since to manage my credit score has gone a long way toward improving my credit score. Essentially, this major negative past problem is what it is, a thing of the past.