Clearing Up Credit Scores
If you’ve ever taken out a loan or a mortgage, then you will almost certainly have heard the term “credit score” thrown around. However, while most people have a vague idea of what this means- they know it’s something to do with your credit history- few bother to learn much more than the basics. You should, though, since your credit score can have a huge impact on your life for just a little number. It determines the interest rates you’ll pay on loans, and it could make all the difference between getting a mortgage and being declined one. It’s therefore well worth learning more about how credit scores work- and luckily for you, we’re here to help! Read on, and all will be explained.
Just What is a Credit Score?
Your credit score essential boils down to a three-digit number. But while the end result is pretty straightforward, a lot of different factors go into deciding your credit score. In effect, it’s the end result of your whole life’s financial history, so every loan, overdraft, and unpaid bill will have an effect on your score. Even credit score searches when you apply for a loan can have a negative impact, so it is definitely something you should bear in mind. All of this information is then put into a complicated mathematical system, which condenses the data into an easily understandable figure. Lenders can look at your credit score an instantly make a decision about how much of a risk you pose- and whether or not they want to take on that risk.
Lenders don’t want the hassle of having to follow up a borrower who is late on their repayments, or worse still, take action to recover their money. Even if they manage to get back every penny they are owed, the whole process is still time-consuming, and something they would rather avoid. If your credit score is high, then they will see you are someone who is careful with their money, and therefore unlikely to fall behind with their payments. Not only are people with high credit scores more likely to be accepted for financing, but they will also typically be given lower interest rates, too.
How Can I Boost My Credit Score?
Since your credit score is so complex, it’s relatively easy for mistakes to be made which can have a pretty serious impact on your score. For that reason, it’s a smart idea to regularly review your credit report to make sure all the information is accurate. If you notice anything that’s not right, then be sure to report it to whoever made the mistake, so that it can be fixed as soon as possible. It’s not enough to just know your credit rating, though. Unless you have a perfect score, there will always be things you can do to boost your credit rating. A financial planner will be able to help you do this, and also provide useful advice on how you can best put your credit score to good use. Even if you are in a lot of debt, there are still steps you can take to boost your credit rating and get out of your current situation- so be sure to speak to the experts and get the ball rolling as soon as possible.