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The importance of credit score

By Sally Maison
Published: Friday, November 12th, 2010

In United States of America, it is a requirement that you have a credit report or credit score. On banking system your credit card would give you credit scores whenever you make a successful payment. This process is easier than waiting for the result of your credit report by the Credit Bureau. The most common worse reports that could affect you score would be debts, charge- offs, foreclosure and bankruptcy. Credit reports does not only contains credit score but also, your important information such as Social security number, driver’s license number, previous and present address, contact numbers, and previous employment.

A credit report is the basis of your credit scores; it is an ongoing monitoring of how you handle your finances. These reports are coming from the credit bureaus, court system and other public records. It’s important to care of these reports because once it was already submitted and reflected, it’s not easy disputing it, it may stay there for several years and this could affect you loan applications and other credit based business you are planning to have. Bankruptcies would even reflect on your reports for ten years.

A special computer program generates this information, it’s too complex to do this manually using those credit reports, so this computer program makes it easier but efficiently in giving this credit reports. Some individuals have more than two credit cards and some have even more than a dozen so it’s really important having this highly secured and guarded computer program being used.

What is the made up of your credit score? The credit score is made up of payment history(35%), your credit utilization(30%), the length of credit history(15%), the types of credit used(10%), and your recent credit search(10%).

Credit score is the main basis or a requirement when applying for a loan or buying properties, it normally ranges from 300-850. An example of a loan is a student loan, student who wishes to pursue a higher education in Universities would need to have a good credit score especially if their financial aid is not enough to fund their needs, if they were likely apply for private loans, credit score is really important. Credit scores are used because they are less expensive, efficient, reliable and does not fail.

Most students who do not have the required credit score may add a co-signer and the higher the credit score of the co-signer, the lower the interest rate would be, but this is case to case basis depending on the student loan company they are applying to.

Higher credit score would not only lower down interest rates but could also allow you to request a higher amount of money. Credit score basically lets the lender company know if you are a good payer or not. They also check if you borrowed in the past and paid the credit as you have promised. But having a high credit score is not telling you that this loans you are applying would already be 100% approved. It would still be reviewed.

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