Credit Scores - Understanding and Improving Your Credit Score
When you apply for a loan, lenders try to determine what your risk level is. They are deciding if you can afford the loan, the terms, and what their potential risk is should they extend you credit.
Lenders look at your debt versus your current income, how long you have been employed on your job, and how you have paid your debts in the past. The better your credit score, the chances are you will get the best possible terms for your loan. You can get lower interest rates and faster approvals when you have an excellent credit score.
Your credit report is accessed by the prospective lender to determine if you are credit worthy. This report shows your credit history:
1. The type of credit you use.
2. How long your accounts have been open.
3. How timely you pay your bills.
The lender can also see how much credit you are currently using and how many potential lenders are looking at your report.
You should verify the information on your credit report. You can subscribe to services to receive your report at set intervals or you can annually obtain a free credit report. Derogatory information will affect the interest rates you obtain and the fees you pay. You can be declined for credit based on erroneous information in your credit report.
After obtaining a current report, verify all of the information in it. If you find an error, the credit reporting agency must investigate the potential error. They also must reply to you within thirty days. If this happens while you are applying for credit, you should inform your lender of the inaccuracy.
A few ways you can improve your credit score over time are:
1. Pay your bills on time.
2. Get current and stay current.
3. If you are in trouble making payments, get help. This will take time to turn around your score, but it will work.
4. Reduce the amount of credit you are using ie keep it low on credit cards.
5. Don't close accounts to raise your score. Generally this may lower your score.
Well, this is a good beginning to understanding your credit and ways to improve your credit score over time. Everything worth having takes time so just work at it consistently.
Related Tags: loan, mortgage, credit, credit score, lender
Nancy Woodward is a Real Estate Professional and business writer. Her online newsletter provides Mortgage and Real Estate Information, Resources and products for your financial prosperity. Register at MillionDollarReferralLady'sBlog
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