The lenders mostly rely on the credit scores of their borrowers to determine their credit-worthiness . As a borrower, we depend so much on credits for the important things in life – whether it is for buying car, getting a computer or even loans. Your credit score is a three-digit number which can determine if you can do these things and even how much it will cost you .

Your credit score simply determines if you can borrow an amount to a lender or a lending company . Using the credit score, lenders can assure with some accuracy how likely the borrower is to repay a loan and make payments on time . Its how electronics and department stores can offer instant credit.

There are few lenders out there who believes that scores alone don’t do a good job of distinguishing the credit-worthiness of those with average scores although credit scores are far from obsolete . Few years ago, Fair Issac foreseen a borrower with a 680 FICO score had 0.7 percent chance of ever defaulting on the loan, and someone with a 700 score had a 0.3 percent chance. However, 1.5 percent of year-old mortgages belonging to borrowers with credit scores between 660 and 720 have had their homes foreclosed or are in the process of foreclosure.

Now, phone payment records and other alternative credit information such as rent payment histories are now being used more frequently to determine a borrower’s ability to repay a loan . The ones who are most likely to pay their bills on time are typically the people with good credit scores . After all, if you don’t pay your phone bill for 2-3 months, it could go to collection which will most certainly mess up your credit .

If you are the borrower, do you agree with this new system? There can be advantage and disadvantages on your part.