Your Credit Score determines the amount of loan you can apply for. Your credit score is a matter of concern for any lender offering you his money. A person with bad credit applying for loan can be compared to a fish in the middle of a desert. Credit score is a three-digit figure, which reflects your past collisions with debts loan providers.
Credit rating agencies calculate your credit score. Few of the credit rating agencies are Equifax, Experian, and Transunion. They prepare a complete report of your debts and payments. You can log on to their websites to get your credit report, which contains the information which a lender looks for. Following are the things, which constitute your credit score according to the percentage of importance they are holding in your credit score:
Payment history – 35%
Amounts owned – 30%
Length of the credit history – 15%
New credit – 10%
Types of credit used – 10%
Loan lenders look for your credit score whenever you apply for a loan. As they are offering you their funds for your benefit, they also need some assurance that you will repay their money. Your credit score is that assurance they are looking for.
A good credit score will help you in following ways:
People can get loans faster.
Credit decisions are faster.
More credit will be available to you as loan amount
Interest rates will be lower cutting down your monthly bills
It is not difficult to get the tag of bad credit attached to you. It can be due to late payments or non-payments of loan installments in the past, or because of your unpaid credit card bills, bankruptcy or arrears. A score below 500 is considered as a poor score in the books of the lenders.
Improving your credit score. You can improve your credit score in the following manner:
1. Pay your bills on time.
2. The longer you make payments on time, the better your score will be.
3. Paying off a collection account will not remove it from you credit score.
4. Contact your lender if facing any problem in making monthly payments.
5. Keep your balances of credit cards to low amounts.
6. Don’t open a number of credit cards when you don’t need them.
7. Check your credit report regularly.
Improving credit score is becoming a matter of concern, so you need to consult someone who is professional in financial matters i.e. credit-counseling agencies or attend credit score improvement programs. Evaluate your credit score and know where you lie in the eyes of a lender.
