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How Does a Credit Score Affect Your Life?

By Derek Brown
Published: Saturday, January 8th, 2011

In acquiring properties, most people finance their housing, for example, through availing loans. To be able to qualify for a loan, the bank reviews your credit report where in you enlist the companies you previously availed loans to, credit cards, phone bills, and other information that reflects your behaviour towards handling your finances or how often you update your payments. This determines your credit score. Credit score represents how a person is credit worthy. The risk of lending a large amount of money makes the credit score a very useful reference for banks to assess a creditor’s qualification, interest rates and credit limits. It also determines who can give the most revenue to the creditor.

Credit scores are three-digit numbers ranging from 300 to 900. The average credit score is 678; score higher that 678 can grant you better loans with lower interest rates which can help you save money. Scores lower than that means you will have to pay more for credit. This is because banks and other lenders are at higher risk of losses.

 Updated payments of credit cards, electrical bill and phone bills give higher ratings to your credit score.  If your score need improvement, make sure to pay your bills on time. The most recent transactions eats up a higher percentage of your credit score compared to you late payment a few years ago. This means, that there is a room for improving your records. The proportion of your debt to available credit ratio is also taken into consideration. Applications for too many credits on the other hand may lower your score. This makes it apparent that you are in constant need of money, exhausting all possible resources and that you cannot handle your finances well. It is important to manage your credit score and keep it on a good standing most especially if you are planning on applying for a loan.

In conclusion, keeping a clean credit history will in turn give you more opportunities to save a lot, because lenders will have more confidence in you. By being wary of bad debts you are building up a remarkable image preferred by banks and other lenders. When the time comes and you decide that it is time for a financial assistance, looking for creditors or applying for a loan will be a positive experience for you. You will be able to stretch your money farther than you think.

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