These days, everyone seems to be concerned about his or her credit score. Lenders and credit bureaus have made it clear that the credit score, whether the new VantageScore model or the FICO score model, is a vital part of determining whether or not to extend credit to a consumer. The score is a distillation of a number of factors that make up a consumer's credit history and it allows a lender to see, at a glance if the would-be borrower is worthy of the loan.
Not only will a high credit score make it more likely that a consumer will get a loan, but the score will also help determine whether that loan will be granted at a favorable interest rate. The best interest rates are given to those with the best scores, and those with lower scores will have to pay higher interest rates and fees. Because of this, many consumers are interested in knowing how to improve their scores, and there is not shortage of companies that are willing to provide advice on that topic for a fee.
But the one thing that every consumer can do to increase his or her credit score is easy to do and costs nothing - pay bills on time. It may seem both simple and obvious, but a history of paying bills on time is important to creditors. After all, the decision regarding whether or not to grant a loan is based in part upon whether or not the lender expects to be repaid. The more likely the consumer is to repay, the less likely he or she will be to default.
How a consumer has historically paid bills makes up 35% of the credit score. More than one third of the score is devoted to whether the bills were paid on time or paid at all. No other component makes up as large a portion of the score, and for good reason - lenders want to be repaid! That said, the easiest and cheapest way to start improving a credit score is to make a concerted effort to pay bills on time. It is better to make even a minimum payment on time than it is to pay late and in full. With online bill paying becoming more and more common, it is not possible to schedule bills to be paid automatically, which can be of tremendous benefit to those consumers who aren't too organized and sometimes just forget to pay.
This is one of those cases where the most effective solution also happens to be the cheapest, and this solution is free. If you want to see your credit score increase, make sure that your bills are paid on time.
There's a lot of confusing information about credit scores out there. There are people out there who believe that they don't have a credit score and many who think that their credit score doesn't count for much. Your credit score can spoil your chances of getting some jobs, of good interest rates and even your chances of getting some apartments.
The fact is if you have bills and a bank account then you have a credit score and your credit score matters more than you might realise. Your credit score is may be refered to by a number of other terms, including a credit risk rating, a credit rating, a FICO rating, a FICO score or a credit risk score. All these terms refer to the same thing the three-digit number that allows lenders get an idea of how likely you are to repay your bills.
Each time you apply for credit, apply for a job that requires you to handle money, or even apply for some more exclusive types of apartment living your credit score is checked.
In fact, your credit score can be checked by anyone with a legitimate business and reason to do so. Your credit score is based on your past financial responsibilities and past payment records and credit and it provides potential lenders with an easy snapshot of your current financial state and past repayment habits.
Your credit score lets lenders know fast how much of a credit risk you will be. Based on your credit score lenders decide whether to trust you financially and give you better rates when you apply for a loan. Apartment managers will decide whether you can be trusted to pay your rent on time. Employers will decide whether you can be trusted in a high responsibility job that requires you to handle money.
There's quite a bit of misinformation circulated about crdit scores especially through some less than scrupulous companies who claim that they can help you with your credit report and credit score, for a fee of course.
Advertisements and suspect claims can mislead you to the point where you may come away with the idea that in order to boost or fix your credit score, you will have to pay a company or leave credit repair in the hands of the so-called 'experts'. This is not necessarily the case. It is possible to bring down debts and boost your credit by yourself with no expensive help at all.
Both Charles Essmeier & Darren Yates are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.