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October 3rd, 2007
The majority of people live their everyday lives without truly understanding what a credit score means. However, this is a very important part of our everyday lives that everyone should be aware of. A credit score is a way for creditors to gauge your level of trustworthiness when it comes to paying back loans. Therefore, if an individual were to have a horrible credit score then it would be difficult for them to get a loan. If they were able to get a loan, their interest rate would be much higher then any of the other individual who would have applied. Credit score is much more then just a way creditors rate you, it can also effect where you are able to get employed at. Some firms, especially financial based ones, will ask to check your credit prior to hiring. The reason behind this is based on whether or not an individual is able to handle money properly and responsibly. If an individual is unable to handle their own money, then often time’s firms are hesitant to allow them to handle their own money.
What Determines a Credit Score?
Here are a few ways a credit score is determined:
- Your Payment History- How well you pay your bills is the biggest factor towards determining your credit history. If you make your payments on time your credit score will improve, if you miss payments your credit score will take a hit.
- Credit Cards- Your credit cards are going to determine your credit history the most. The more credit card accounts you have open the higher your debt to income ratio, which will help to lower your credit score. Think twice before you apply for all those discount credit cards.
- Debt to Income Ratio- If your debt is more then 30% of your income that will significantly hamper your ability to get a loan.
- Inaccurate reports/Identity theft- This is not an express determinant of your credit score but it is a major reason why some people have bad credit scores. Everyone makes mistakes and it is possible a credit company has made an error on your credit score. You can call up one of the major credit reporting networks and have them review any marks on your credit report that you may think are false. Another problem to watch out for is identity theft. If someone has stolen your identity it is possible that they have wrong up a whole bunch of bad credit marks on your credit report.
The best way to keep your credit score down is to:
- Pay your bills on time
- Reduce your debt
- Check for inaccuracies on your credit report
- Don’t apply for a bunch of credit cards and don’t close out your older credit accounts
Know Your Credit Score
Credit scores play a vast role in our society, so it is extremely important to keep them as high as possible. Your credit score can change from: late payments, debt that outweighs assets, your past history, and a variety of other factors. When searching the web there are a variety of different website out there designed to help you get your credit score back on track. Hopefully after reading this and doing some research of your own you will have a better understanding of how a credit score can be a big deal, and exactly what one is.
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