The world is an unfriendly place for those with poor credit scores. They are constantly denied loans and new credit cards or stuck for years with exorbitant interest rates. If this sounds familiar, you can get on top of the situation.
What is a Credit Score?
Basically, your credit score tells the world how trustworthy you are with money. Before you can qualify for a new credit card, an auto loan or sometimes even an apartment rental, your score will be checked. If your score is not up to the standards of the checker, your request can be denied or you can be stuck with an extremely high interest rate.Several things contribute to your credit score. One of them is late or missed payments to a loan, credit card or utility. At the time, it may seem like a small thing, and a way to have extra money during any given month. However, a skipped or late payment will impact your credit score for a full seven years, so ultimately you should do your best to pay every bill on time.
Something else that could be a disadvantage is debt-to-income ratio. Each income level is allowed a different amount of debt. Those who have greater income can carry more debt than those with lower income. If your credit card is constantly maxed out, that is bad for your debt-to-income ratio. It's much better to have several credit cards instead of one, and to pay off the balance on each of them every month.
A secured credit card is one that can be obtained relatively easily because you deposit the amount of money that can be charged on the card as the security. Banks are more likely to authorize this type of card since there is no risk of nonpayment. A secured credit card that is paid off every month is a good step towards improving your credit rating.
Where Do I Find My Credit Score?
Everyone is entitled to one free credit report a year. This is fine if nothing much changes in your life, but if you have a lot going on, you may want to become a member of one of the three major credit reporting agencies. In addition to your score, once you are a member you will receive alerts whenever your report is checked.The agency will even work on your behalf to do things like reduce your utility payments or tell you some easy ways to improve your score. Once you have a membership in a credit reporting agency, you can check your credit rating every day if you want to.
Credit scores are numbers that range from 300 (bad) to 850 (excellent). You won't be able to do much in the world with a rating in the bad range, but on the other hand, the world is your oyster if you have a score in the excellent range, which is anywhere from 720-850.
While a score of 850 may be something to strive for, any score over 690 should be enough for you to see certain benefits. You can check your score at any of the credit reporting agencies. Some banks and credit card companies also show your score as a benefit.
What Else Should I look For in My Report?
If you check your credit score and see that it is much lower than you hoped, go over your report very carefully to check for accuracy. If you see something wrong, you can contest it. Things to look for and contest include addresses you never lived at or accounts you never opened. Fixing these mistakes can improve your credit score by many points.If you notice a lot of late or missed payments in your report, try setting up automatic payments to loans, utility companies and credit cards to ensure that your rating keeps heading in the right direction.
Now that you know what's at stake, you can begin working to reach a good credit rating and stay there.
