Bank Credit Rating Data
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The Ultimate Guide to Bank Credit Rating Data 2020
Learn everything about Bank Credit Rating Data. Understand data sources, popular use cases, and data quality.
Table of Contents
What is Bank Credit Rating Data?
Before granting a borrower a loan, banks have to determine the creditworthiness of the borrower either in general terms or in line with a debt or financial obligation. Bank credit rating data is collected during the process of evaluating whether a bank will repay the approved loan at the agreed interest rate. A credit rating score applies to all financial entities looking to borrow a loan. These entities include an individual, corporation, state authority, the federal government - and in this instance, banks.
How is Bank Credit Rating Data collected?
Credit ratings refer to the creditworthiness of a business or government, while in contrast, credit scores only apply to individuals. Bank credit scores data are pulled from the credit history reports that are maintained by credit-reporting agencies such as Equifax in the USA. These credit-reporting agencies act as custodians of credit rating data which they report as a number that ranges between 300 and 850. This three-digit numerical scale uses a form of Fair Isaac (FICO) credit scoring. For companies and governments, credit calculation and valuation are done by a credit rating agency such as Standard & Poor’s (S&P) or Fitch. These agencies are paid by individuals or businesses that are seeking to know their creditworthiness and how it relates to debt issues.
What are the attributes of Bank Credit Rating Data?
The core features of bank credit rating data are crucial frameworks to assess the trustworthiness of borrowers. These features encompass both qualitative and quantitative paradigms:
• Character - Character refers to the lender’s opinion of a potential borrower’s personality and creditworthiness based on reputation and borrowing history. This information can be pulled from past loans to assess how the borrower behaved when repaying previous loans.
• Capacity - The capacity of credit data shows how well-equipped the borrower is to pay the loan. Capacity is determined through the cross-examination of the borrower’s income as compared to recurring debts and evaluating the debt-to-income (DTI) ratio.
• Capital - Capital is a feature of credit rating data that indicates an estimate of the money that has been invested by a business or individual.
• Condition - A condition is an attribute that highlights how the borrower is going to commit the borrowed funds, including when the loan is due to be re-paid and what the interest rate is.
• Collateral - Collateral refers to any asset and security that is generally guaranteed by the borrower to get the funds seamlessly.
What is Bank Credit Rating Data used for?
Credit rating data assists lenders in evaluating the creditworthiness of a potential borrower. For investors, assessing the creditworthiness of a company listed on the stock exchange market is a crucial factor as far as deciding to buy stocks for that particular company is concerned. Furthermore, credit rating is also an important indicator of how well a country is doing based on the banks operating in that country. This factor can also help bond traders in the form of foreign capital to make sound decisions. Countries with higher credit ratings are attract more bond buyers as compared with low credit ratings.
How can a user assess the quality of bank credit data?
In assessing the quality of bank credit rating data, users should keep the following quality aspects in mind:
• Accuracy - The degree to which data are certified, error-free, correct, flawless, reliable.
• Objectivity - The extent to which the bank credit rating data provided by the data vendors is unprejudiced and grounded in facts.
• Completeness - Every detail of the data is accounted for by the data providers.
• Timeliness - Timeliness measures the degree to which the provided information on credit rating for an individual or business is delivered within the set time and is up to date.
• Accessibility - Measures the extent to which data is available and ready to be integrated.
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