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Credit Score
The credit that comes into picture whenever we need to make any decisions based on our financial situation. The whole process of paying our bills on time, the number of credit cards that we possess and the number of things that we have bought will all go into determining our Credit Score. The whole process of assessing our Credit Score is done by the credit bureaus that keep updated records about our financial history and as well.
A Credit Score is a mere three-digit number that bears testimony to your financial transactions. It is a number calculated using your past financial transactions. This will give the lenders an insight into your circumstances to determine on sanctioning your loan. It also helps them in understanding the level of risk to be taken in lending someone money. This report can also be had from looking into the credit reports of the individual. The Credit Score is then fed into the system and the resulting score is compared with other consumers to predict the likelihood of somebody repaying the loan and making the payments on time.
The Credit Score calculation is done by the credit bureaus to determine the financial health and stability of the individual. A high Credit Score depicts an individual worthy of the risk; a low Credit Score depicts a high risk factor, which means the lender will have to cover his risk with a high interest rate or with collateral such as a house or a property to cover for the loan. A good Credit Score is especially important when borrowing money for your home. The interest rate generally reflects your credit worthiness. A better score will make it easier and cheaper to borrow for a mortgage. If there is only one percent reduction in the interest rate, you can save a few thousand dollars in interest payments over the life of the mortgage.
A good credit score can be botched by some unexpected event that may happen for which you are not truly prepared. Let this not depress you because there is help at hand. You can follow a few steps to bring your Credit Score back on track. Always make sure that you pay all your bills on time. Never be late on the phone, house rent, electricity, or gas bills late because they tend to lower your Credit Score quite significantly. Get yourself a secured credit card if you have bad credit or no credit in the start as they will significantly improve your Credit Score. The last thing is the most important one: keep tabs on your credit report because once in a while, the credit report will have false information and this will adversely affect your credit score. The information needs to be accurate and hence it is optimal to check for your Credit Score once every month to maintain a clean sheet.
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