Friday, January 12, 2018

Why Is Your Credit Score Important?

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What is your credit score?

A credit score is a value which is calculated by lenders to judge your credit at a certain point in time. It is used to assess how likely you are to repay any loan you are given, and therefore whether they should take the risk and give you the money. 

There are three different credit bureaus: Equifax, Experian and TransUnion, and these each calculate the credit score slightly differently, but based on the same financial factors. There are five main factors which come into play when calculating your credit score and how likely you are to be accepted for a loan:

  • Payment history: a record of all payments relating to credit which you have paid
  • Outstanding debt: any debt you have which hasn’t been paid
  • Length of credit: how long you’ve had credit, the longer the better because it shows stability
  • New credit: any credit you are pursuing
  • Types of credit: the type of credit you have

Can I improve my credit score?

There is always a risk in life that something will happen that makes paying back your credit near impossible, and due to this there may be a few bad records on your credit report. But don't fret: it could be a mistake on your report, which you can get a best credit repair service to help you with, or it could be something that you can change and manage. 

There are a few ways you can save yourself some money and improve your credit score:
  • Cut back on your spending
  • Pay off any existing debt which may be affecting your credits score
  • Closing multiple credit cards
  • Start saving and budgeting

Credit counseling

If you are really struggling with paying back your debts and managing your credit score you can always ask for help from a credit counsellor. These are non-profit companies and will provide you with different services depending on your needs. They will work with you and your lenders in order to find the best solution for your issue and the best way forward. Most lenders are willing to do this because they will receive some of their owed money back, so it is a win win for them to be involved and help you solve your issues. 

Monitor Your Credit

Think of your personal record and how that follows you all the way through your life, your credit history is exactly the same. Whether you have a high credit score or a low one, it is crucial that you take the time to monitor your credit situation so that you can either improve on your score or maintain it at a high level. You have the right to request your copy of you credit report for free, so take advantage of this and take a look through it to make sure that it is all in order.

Do you need perfect credit?

No. It is not a common occurrence for people to have a completely perfect credit history and score. Lenders are simply looking for evidence that you have paid off your credit most of the time and that you are likely to back what they lend you within a timely fashion. 

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