Learn How To Be Safe From Bad Credit |
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By: Mary Wise Posted: 2006-11-09 00:07:17 |
| Traditionally, the procedure used by most creditors to determine your creditworthiness or credit rating was kept in secrecy. However, the last few years, new legislation has obliged creditors and credit bureaus to make their procedures public and information available to those affected by their activity.You need to bear in mind that a favorable credit score will help you obtain favorable loan terms. Credit card issuing agencies, for instance, often determine the interest rate and fees that they will charge based on credit score. Credit cards featuring low interest rates and promotional rates are only issued to applicants with a high credit rating.Understanding Credit Score A credit score is a single number that is based on an analysis of information contained in a credit report. This report provides an indication of how likely a person is to repay his or her debts. It contains a variety of information, including payment history, amount of debt owed, and types of credit used. Credit scores, and the credit reports on which they are based, influence consumer access to credit, housing, insurance, basic utility services, and even employment.The spreading of credit score has increased the speed with which many credit decisions can be made, the potential for customized pricing of credit, and the overall efficiency of credit granting. However, in consumer lending, inaccurate scores can result in unfair treatment of borrowers who are denied or charged high prices for credit.Improving Your Credit Score The first thing you need to understand about how to improve your credit score is that you should stay as current as possible. Delinquent payments and collections on your credit report have a negative impact on your credit score. The more you pay your bills on time, the better your score will be. It is important to remember that paying off any collection accounts does not remove the negative impact. It is critical that you negotiate with the lender and get them to agree (in writing) to report the account favorably or not report it all in exchange for canceling your debt.Another thing that you should do is pay down balances that are near their limits. High outstanding debts near credit limits send a bad signal to lenders. Don't open new accounts just for the fun of it, unless of course you are attempting to rebuild your credit with them. Be careful not to open many accounts altogether as this can backfire and lower your credit score. If you are patient and pay on term, then your credit score will improve.How To Select a Lender Applicants must keep in mind while looking for lenders that it is better if you already know what your FICO score prior to applying. This way you can discuss with your lender whether you’ll be able to get approved or not. Loan declines would affect your credit score negatively otherwise. You should also avoid giving your information to a lender if they will pull your credit report to get your FICO score. This will only reduce your credit score by five to ten points each time. |
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