Due to the math involved with banks considering loans for an individual, the margin of error is low. This leads to some competition when a bank chooses who they want to loan money out to. Often good people with bad credit scores are forced to default.
Credit scores identify high risk consumers and individuals that may occur to the bank as less likely to be able to pay off their loan. Many factors are considered in this process such as an individuals spending to pay ratio, and the frequency that an individual is late making payments on their credit card.
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