When you were at school, you brought back home your report card to show your parents how you fared in school. Similarly a credit report shows how you are faring in your financial life, except for that you don’t have to bring it back home to show your mom and dad anymore. But it still decides the financial life you will have based on this score.
What is a credit score?
This is a three digit number between 400 and 850 that is based on the credit history that you have as a debtor. The numerical data provided here is based on your debt paying history, debt profile as well as statistical information about other borrowers used by lenders to determine credit behaviors.
What does your credit score mean?
Your credit history is measured through your credit score and potential lenders would definitely like to take a look at your score to find out if you a good borrower. If you have a low credit score lenders automatically assume that you are someone who is not likely to pay your debts on time or at all. If you have a high credit score that means you are a good borrower and someone who pays their dues on time.
How effective is a credit report?
Credit scores are important in almost any financial transaction you may carry out. Whether it is a house you want to buy or a car or even want to apply for refinance, your credit score will come in to play. Even if you want to rent an apartment, your scores will be considered first. Without a good credit score your application may be refused by your landlord. Credit card companies may want to figure out a better offer for you if you have a good score. On the other hand with a low credit score if you are granted a loan, you might have to pay a huge rate of interest or also may have to face refusal from lenders. On the other hand with a high credit score you can get better interest rates on your loans and save money as compared to others with a low score. If you have a low credit score you may seek professional help and go for credit counseling. Although credit counseling will show on your report, it will still have a better influence on the creditors. You might have to pay a huge amount as interest but still your loan will be sanctioned.
How can you improve your credit score?
There are few basic ways to improve your credit score. They are:
• Try to pay off or reduce any outstanding debt.
• Do not apply for new credit unless you have moved upward on your credit score.
• Each credit check done by your creditor will have an adverse effect on your score. So, don’t let your creditor take too many looks on your report.
• Do not keep to many credit cards. Keep the ones you have had for the longest period of time.
• Have a long credit history than a short one.
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