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Why is Credit score important?

By Janet Lacey
Published: Friday, August 6th, 2010

When the different companies are going to give you money, there are a couple of things that they want to check before they give the money to you. After all, they want to be sure that they are going to get the money they invested in you back and it is not going to be something that they might end up regretting and writing off as loses. For such purposes, a credit score comes in handy. This number, or numbers, is all that is required to ensure that you are capable of paying the loan back and that you will not default on the payments in the future.

Who gives the credit score?

A credit score is something that is provided by a number of companies and not just one single entity out there. In fact, Experian, Equifax, and Transunion are the three bureaus involved in generating your credit scores. You can be assured that these three companies are going to provide unique scores because they each have slightly different approaches to produce that elusive number. Hence, they would all have a say in your report as well, which is why you should try and maintain good financial status to maintain a healthy score.

What do companies look for in the credit score?

When a company is interested in your credit score, it might be due to a number of reasons. The most obvious reason would be if you have filed for a credit card or are planning to open a new account. For such activities, it is important that you have a good credit standing so that you can open your account or get the card without any problem whatsoever. These kind of inquiries are even observed in your credit statement and it might be necessary for you to take a good look at them to make sure that information has not been requested unnecessarily by anyone.

Can bad credit history be permanently removed?

The good news is that credit scores are usually reflective of your recent financial activity. Hence, you shouldn’t be too worried about something that might have happened long back in the past. Usually, the credit ratings are derived from something that might have happened not more than 7 years back in the past. Only bankruptcy cases are recorded for up to a period of ten years and beyond that, there is nothing that can alter your credit score in any way.  

Pay your bills on time and don’t miss out any payments on your loans or other outstanding debt that you might be having. As long as you are in good control of your finances, there is nothing really that can affect you in any significant manner. In fact, it takes time to build the score, and you shouldn’t get frustrated with the process mid way. To the best extent, preach some healthy spending habits so that you don’t end up in debt or in any sort of problem at a later stage. This is important and could potentially determine whether or not your credit scores can recover.

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