When it comes to applying for a loan, your credit is one of the most important factors; any responsible lender or organization would want to make sure you can comfortably afford to manage any new borrowing without overstretching. Many at times, relevant information on your personal file is used to calculate your credit score and people with high score are usually seen as lower risk and more likely to get the loan or even a job. It is because of all this people are always advised to understand what a credit score is, what affects their credit rating and what they can do to improve their score.
What is a credit score?
Your credit score is basically a 3 digit number that is normally generated by using information in your personal credit file. Many at times, it is used to predict the risk or the likelihood that a person will be able to pay his bills or not. In America the median credit score is 711 and if your score below 660, you will have trouble getting a loan because your credit score is deemed poor.
What impacts your credit rating?
There are quite a number of things that can affect you credit rating, and people are always advised to avoid them. Here are some of them the things that may affect your credit rating: large amounts of existing debts, making late or missing payment on anything ranging from personal to mortgage and mistakes on your credit report among others.
How you can improve your credit score
If your credit score is not in the best shape, there are things you can do to build and improve it once again. Avoid those expensive credit repair companies; they can promise they will help you fix your score while in real sense they can’t. Here top tips to improve your credit score.
- Pay your bills on time; not only can you accumulate interest charges on that late payment of bills, but it can also significantly impact on your credit score. On time payment is one of the key factor credit bureaus into consideration when calculating your credit score.
- Stop applying for credit until you have sorted out any problem on your personal file and boost your credit score. As if that is not even enough; if there are credit cards that you are not using, cancel them to reduce any chances of you being a victim to fraud in case they are stolen.
- Make sure there are no errors in your credit report; at times errors can be made on your credit report, you need to take the necessary steps like writing a letter to the credit bureau t have it fixed.
- Last but not least, if you have hit the wall and making ends meet has become impossible, talk to a credit counselor or your creditors. They won’t help to rebuild your score immediately, but if you start to manage your rating and pay on time, your credit score should start to go up over time.
At the end, improving your credit score is all about fixing errors in your credit history if they are any and then following a number of guidelines that have been mentioned above to maintain a consistent and god credit history.
What is a credit report?
Your credit report contains all of your personal information: the loans you’ve taken out, what your credit limits are, if you pay your credit bill on time, etc. You can request a free credit score report and receive it in the mail, and the information on this process is widely available online. If you require an instant credit report, you get access it online for a fee of around $15/month. This $15/month entitles you to unlimited access to your credit report and credit scores. If you are ever in a situation where you have to fix your credit report due to an error, you are not alone. Errors are surprisingly common, so keep your eye out for them!