So what is a credit score you are asking? It’s an exact indicator that tells a creditor or a lender your ability and how capable you are to pay off your debts should the loan be approved. Usually, the score can be anywhere from 350 to 850, and if you do not score that well, your loan may be disapproved, or if approved, it will be at a significantly higher interest rate.
You may find this to be unfair, but it’s a fact of life. If you need the loan, it’s either you agree to these terms or you simply don’t get the money.
In the United States, most people are aware of this, and as a result have a fairly respectable credit score. This is a result of not spending beyond their means, not borrowing more than they can afford, while paying their bills on time.
But for those who do not score as well, the one’s who are forced to find a way to make their financial ends meet, by watching their expenses closely and paying their debts gradually and hopefully on time. The best advice is to talk to your creditor about your particular situation, so they can arrange a suitable payment plan for you, that won’t appear on their permanent records affecting your credit score.
One way to improve your score is, if you happen to have a lot of credit cards, it’s recommended you cancel all of them except one or two. You should keep the credit cards that you have had the longest, provided it has been well maintained, as this will be favorable on your credit score.
If your credit score happens to be say… a few points below 700, look at the results and make sure everything listed is correct. Who knows, there may be a few errors listed that may correct the score. You can then call the credit agency by sending them supporting documents to possible correct it.
To get a copy of your credit score, you can get in touch with one or all three of the following credit agencies: Equifax, Experian or Transunion. Keep in mind that their scoring systems are a little different from one another, so it’s advised you get the scores from all three. It’s also recommended you get a credit report on a yearly basis, and then compare the results from the previous year.
As mentioned, a good credit score of 700 or above, will be able to get you low interest rates when applying for a loan. You will always want to keep a pulse on what your credit score is before even attempting to ask for a loan. This will obviously avoid the embarrassment of being told that there are some outstanding issues or being flatly ‘denied’ of a loan. This of course will never happen you have a good credit score.