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Credit Files and Credit Scoring – A Frequently Asked Questions List

By Brian Anderson
Published: Wednesday, December 30th, 2009

Knowing what there is about loaning money is the most basic credit score advice. Here are some quick answers to the frequently asked questions about credit scores.

What is a credit file?

A credit file stores all of the key financial information that a lender needs to know about you. This file includes your credit history as well as if your current debts. This file also contains information such as your name and address, if you had any bankruptcies, and other key information about you. For example, your credit file may also show whether your car has been repossessed and if you have any unpaid balances. Most credit score advices talk about your credit file. Knowing this can help you a lot.

What is credit scoring?

Lenders will use your credit file in order to generate a credit score. They will use it to make a decision to lend to you money or not. An individual will earn a certain number of points depending on the information seen in your credit report. Income, debts, and payment history are examples of these. After that, the score is then combined with any additional information found on the application form you have filled out. Also, the lender will put into context what it already knows about you to create a final score.

Take note that different lenders use different styles of scoring. You may be accepted by one lending company and might be rejected by another. This can happen even if they are both using the same credit file you have given them. There are a lot of ways to improve your credit score. When applying for one, take into consideration this credit score advice: get on the electoral roll. Most, if not all, lenders will refuse you are not in it. Finally, always make sure you make payments on time.

What are the important values I must have when trying to get a loan?

Always be patient – Avoid making a lot of applications for financial products. This is because each one will leave a small mark on your credit file. When this builds up, other lenders will be able to see your actions. For example, a lending company rejects you; other lenders will see that you have been refused elsewhere. They might, in turn, be less inclined to say yes to your application, creating more problems. This is a key credit score advice that you must follow.

Clear out unused cards. – Cancelling unused credit and debit cards will improve your score because it will reduce your available credit limit. Before you do that, make sure that there are no other outstanding debts in it. After that, contact your lender. Shred the card afterwards so that no one will be able to use it. Take note that while cancelling accounts might improve your score, do not cancel old accounts. The older your credit history, the better it is for the eyes of the lender because it will be easier to trust you. Numerous credit score advices tell you that you should cancel, while others don’t. You can cancel but make sure of your decision before doing it.

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