If you’ve ever had the misfortune of being refused credit, somewhat surprisingly, you will know just how embarrassing and frustrating it can be. Whether it happened in the bank during a mortgage application or in a mobile phone store during the registration process, it can leave you upset and facing a degree of uncertainty. However, you don’t have to leave your next credit application to chance. Follow link to get your credit score and check that your credit status is an accurate reflection of your circumstances.
What is a credit score?
A credit score is a numerical indication of your worthiness for credit. Lenders calculate a specific score based on your credit file, your history with the lender in question and the information you supply at the application stage. Lenders will take very different approaches to compiling a credit score, depending on the type of credit being applied for, the level of risk they deem acceptable and their chosen business model. Because you are probably making repayments, paying your bills and making new applications for credit on an ongoing basis, it stands to reason that your credit score will change regularly. Depending on the lender and the type of credit you’re applying for, just a few points either way on your credit score could determine the success or failure of your application. For more information about how Experian calculate your credit score play this video.
What can affect your credit score?
Catching up with late repayments or paying off a debt completely should improve your credit score significantly. However, missing a credit card charge deadline or allowing your mobile phone contract to slip into default could drastically reduce your score. Other factors that can play a part include your length of service with your current employer, your history with the lender in question and whether or not you’re on the electoral roll.
Unfortunately, there is no defined number at which you can expect to have all your credit applications approved. Whereas an application for a mobile phone contract might be approved without delay, a mortgage application on the same day could be refused. Some lenders specialise in providing credit for people with low credit scores. However, they charge high levels of interest and they are far fewer in number since the economic crash of 2008.
What are the advantages of knowing your credit score?
Making an application for credit without knowing enough about your current credit status could end in an embarrassing rejection that you weren’t expecting. You may also be forced to pay a rate of interest that you hadn’t budgeted for. Although a favourable credit score from a leading credit reference agency won’t be a 100 percent guarantee of getting the finance you need, it will provide you with an indication of your chances of success. It will also alert you to any credit issues that could be responsible for a particularly low score.
By regularly checking your credit score and keeping an eye on the information held against your name, you can enhance your ability to obtain affordable credit for the most important purchases in life.
Other than the initial acquisition of a car, the maintenance of your credit score should be one of the highest priorities in purchasing a vehicle. A car dealership will not be on board with you getting a loan outside of the dealership and bringing the money in to purchase your vehicle, but in the end it isn’t about what the dealership wants it is about you.
Getting car loans from a financial institution is going to help you keep your credit report positive. For example, if you get a loan for 10 thousand you can purchase your new car outright and pay your lump sum of monthly payments back to the financial institution instead of being hooked by different fees for purchase at the dealership.
Agencies involved in car finance will not be happy with you if you get a loan elsewhere because they make commission off of every loan they start. Most financial institution lenders don’t make commission from the loans they perform so they are more interested in satisfied and repeat customers.
A customer is basically consolidating their costs into one payment plan by going to a financial institution first. Car finance is a tricky business with many different kinds of additives to what should be a cut and dry purchase. Paying off your principal faster can reduce your interest rates and this can be especially helpful in the case of your loan payments. Your car loans will diminish faster if you pay more towards them quickly.
Your car finance professional should tell you whether your interest is simple interest or compound. If it is compound interest then paying off your principal will help reduce this. If your loan is simple interest then paying off your principal will make no difference to how much you are paying in interest every month. A simple interest payment will be the same until you complete the payment of the loan.
If you are paying off a compound interest loan and you want to pay more on the principal, then make sure you denote this with a short letter or on the payment itself that you are paying towards the principal. A simple “Principal Only” will suffice usually. Some institutions require additional marking on the check. An extra payment can sometimes take off years to your payments of a loan. This is another great way of improving your credit score as you acquire your new car.
Have you been refused a credit card, loan or mortgage recently? If you are scratching your head trying to work out why, then it may be possible that your credit history might be wrong or corrupted. It might be a good idea to collect together all your financial records to see where the problem may lie.
There are three companies which routinely collect information about every person’s credit score. When you ask to borrow money, or credit in any form, the lender will consult one, or even all three companies to see what your credit score is. They want to see whether you are a good risk for them to take on, or whether you will prove difficult for them by paying late, or in some cases not paying the loan back at all. Your credit score is made up of all the borrowing you currently have and how you have handled this borrowing. Did someone else think you were a good risk? Do you pay back the minimum payments, or do you pay off more? How much do you currently owe and is it within your means?
A credit score high up into the 800s is a very good score indeed, while most people will have a score of around 750. If you find that your score is less than 600, then your credit history is bad. It may prove quite difficult for you to extend your borrowing or to get more credit. It means that you have made late repayments, or you have failed to meet the requirements of your borrowing in some way.
The best way to improve your credit score is to clean up your act. There can be nothing worse than setting your heart on a purchase, whether it’s for shoes, clothes, the latest gadgets, or even a house, and then to be refused credit. It is that heartbreaking, sinking feeling that you get when you find out that your dream purchase is unattainable.
Did you know you can look at your own credit report? By paying a small fee, it is possible for you to purchase your own credit history and look at your score. When you get yourself this report, take a look through and see where the potential problems may lie. It will also tell you about any potential open accounts and which ones you have closed. It is a very worthwhile task to check your own credit report and see where you can improve it, and keep in mind that this is something everyone should do at least once a year.
Since our economy has taken a sharp nosedive, it can be stated that many people are taking a closer look at their credit reports and credit scores, wondering how they can improve upon it. So, if you are among the many consumers trying to find ways to bump up their score, this article is for you.
Before you begin, you need to have a clear understanding of the definition of a credit score. Credit scores are numbers that have been established by the statistical analysis of consumers’ financial records. This analysis is a way to show how “credit worthy” each person is. All of this information is compiled and defined by credit report agencies. This number will tell lenders and potential employers how you handle your money and if you should even be considered for a loan.