Your credit score, let alone Improving your credit score, isn't something that most people even think about very often. But since a healthy credit report is essentially your passport to financial opportunities, building and protecting this highly coveted score card is essential. Why? Because a higher score will usually get you lower interest rates, better car insurance rates and a chance to avoid having to pay deposits to utility companies.
Whether you're applying for a car loan, a bank or retail credit card or if you're seeking a pre-approved mortgage, your score, sometimes referred to as a credit rating, is used by the lender to determine if you're a good candidate for credit. A low credit score can flag you as a credit
risk and may make it difficult to get that loan or charge account. If you're offered a loan in spite of a bad credit score, to compensate for the higher risk for the lender, you'll most
likely have to pay additional fees along with a higher interest rate.
Credit scores can range from 300 to 850 points depending on the scoring system. And as you might expect, the higher the number, the better your credit score.
Each lender will determine its own policy with respect to what constitutes a good or bad credit score, thus variations exist. However, to give you some guidance in your 'improving your credit score' project, here's a brief breakdown:
Although there is some distinction between a low and a poor credit score, it's important to note that many lenders consider consumers with scores under the average as credit risks.
Loss of employment, a challenging economy, living beyond your financial means, or generally mismanaging your money can
result in a poor credit score. However, with more prudent lifestyle choices, improving your credit score is possible. After all, banks love to lend money; it's the reason for their existence.
If you've experienced some financial setbacks, such as a bankruptcy (which remains on your report for 10 years) or an extended period of unemployment, don't lose hope. Most negative notations on your credit report are supposed to disappear from your credit history after 7 years. A smart, conscious belt-tightening, combined with a steely determination, can and probably will help you (and your spouse) with improving your credit score. Thus, live right and watch your credit score gently rise like a hot-air balloon on a warm summer's day.
Here are a few indicators used by credit rating agencies to determine your score. Improving your credit score - and just as importantly, keeping it high - involves altering your behaviour accordingly:
You should aspire to be a highly responsible credit card user.
Besides the obvious benefits of being debt-free, you'll also be happier
and less stressed out about money because you'll have more control - and
enjoy the wonderful feeling about successfully improving your credit score. Then, when you're ready to buy your first home,
you'll be well equipped to get the best terms from the lender.
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