Is your credit report important? There are a lot of people who would not consider their credit rating as something too important to them in their life. There are others who, while recognising its importance, would not be overly concerned about the issue or understand the reasons for its importance. Well, to those people, they should at least be aware of some of the uses that are made of credit reports in the world in which we live.
Lenders
While it may seem obvious to state it, credit reports are predominantly concerned with assessing the risk involved in lending money to you. Lenders are obsessed with one thing, getting repaid, and their entire industry revolves around making this occur. Therefore, they have developed the credit score that will assess your likely hood of repaying them and this is then used to either approve or reject your application for credit. While this is the basic purpose, some more sophisticated lenders desire to get in on an ever larger share of the market and in order to lend to higher risk borrowers, they create different categories of loans which people with lower scores can qualify for. These loans will invariably have higher interest rates and other less favourable conditions and this will be the price you pay for having a lower credit rating.
Since loans are used to finance homes, education, cars, and most other large purchases in life, the inability to get access to credit, or only to be able to get it at less attractive terms and rates, is a substantially reason to care about your credit report and try to keep it in as good a condition as possible.
Credit reports are also used when you apply for renting or leasing accommodation. This is usually because the landlord wants to be fairly certain that you’ll be able to pay your rent as it falls due. So keeping your credit score healthy at this stage will pay off if you need to be approved for renting or leasing residential property.
There is also a trend among employer to start using credit ratings when assessing job applicants. The reasons they are making use of credit reports are of course different for every employer but there is a consensus that a healthy credit report and a good past record of meeting financial commitments is a good sign that the job applicant is someone reliable and worth employing. While it does seem slightly perverse that the very people that will need a job the most are precisely the ones that can be denied it but that’s the direction things are moving in.
By: Joseph Kenny
Posts Tagged ‘Credit Rating’
A Good Credit Report – The Key To Cheap Finance
December 26th, 2009Finance Options For Those With Bad Credit
December 25th, 2009
As anyone who has bad credit will already know, being in this situation can be a real pain, and can have a profound effect on your financial future. In fact, in the current financial climate many of those with damaged credit are finding out just what a nightmare having bad credit can be. For many years consumers in the UK – even those with tarnished credit – have enjoyed easy credit and a great choice of financial products. However, since last summer, when the global credit crunch winged its way to the UK from the United States, this has all changed, and credit conditions have become far more difficult.
This said, whilst credit conditions have certainly become much tougher for those with bad credit there is still available of finance for those with damaged credit, and in fact taking up finance can actually help you to repair your credit. Your credit rating is affected by your repayment habits on debts and other financial commitments, and the more responsible and sensible you are about making these payments the more your credit rating will improve.
There are a number of finance options available for those with bad credit depending on what you are looking for. You can get credit cards that cater specifically for those with damaged credit, and whilst the interest rates on the cards may be higher than the norm what you should aim to do is clear the balance in full each month so that you are not charged any interest at all, yet you can still enjoy the convenience of the credit card and make a start in improving your credit by using and repaying the card responsibly.
There are also loans available for those with damaged credit. In many cases you may find that the only type of loan that you can get is a secured loan, which is a loan that is secured against the house and is therefore only available to homeowners. However, there are some unsecured lenders that will offer finance to those with damaged credit, although this depends on the extent of the damage and the lender’s own eligibility criteria – interest rates on these loans are likely to be quite high, but you can compare to see whether you can find a more competitive deal.
For those planning to buy a property there are also bad credit mortgages available, although the mortgage crisis that has stemmed from the global credit crunch has reduced the choice and availability of mortgage products dramatically. Again, you should compare different mortgages to see if you can find a competitive deal, but remember that borrowing costs in the mortgage sector are still quite high at present.
If you are looking to purchase a car there are two options. You could opt for a loan for those with bad credit and use this to purchase the vehicle, which means that you will have more choice over which vehicle you buy. Alternatively you could opt for dealership finance from one of the number of car dealerships that offer their own finance and cater for those that have damaged credit, but the interest rates are likely to be very high and you will be restricted with regards to the vehicle that you purchase.
By: Brendan Flushing
Three Credit Rating Warning Signs
December 24th, 2009You can see the signs everywhere you look. The person next door has had to file for bankruptcy protection and the lovely family down the road has the bank threatening foreclosure and they will lose their home. Your brother-in-law isn’t able to obtain a decent interest rate on a loan for a new car. But this doesn’t affect you because you don’t have any credit problems – or do you? This article identifies three signs that indicate you are in need of credit repair and suggests some workable solutions.
The First Sign – Your credit score. You are aware of the importance of these and that they are based on everything from the interest that you have to pay to your insurance premiums. Your credit rating is OK – it is 600 and that is a good number, isn’t it?
No, it isn’t – it is an obvious sign that you seriously need to look at credit repair. Scores under 720 require improvement. These scores are between 300 to a perfect 850. Experian, Equifax, and TransUnion, which are the three major credit bureaus, are responsible for the collection of information about you. They get this information from companies from whom you have been previously obtained credit and then write a report. This is where your credit score originates.A higher score indicates less risk to a potential creditor and subsequently increases your chances of a better interest rate.
The Second Sign – Your credit report contains negative comments. It’s been more than twelve months since your credit card payments were late and so you feel that your report must have improved. To check this, you obtain a copy of your credit report and those late payments are still included. Why is that?
Negative comments will remain on the report for up to 18 months, so you must make every effort to avoid late payments if you want to see an improvement. Remember that each negative comment reduces your score.
The Third Sign – You are finding it difficult obtaining a decent rate on your car loan. Picture this scenario: You have been successful in getting a new job on a higher salary than ever before, but it means a longer traveling time. Your old car just wouldn’t be capable, so you need a new car. You go to a car dealership and choose a new car and when you are about to sign for the car loan, you see that the repayments are higher than you have reckoned.This is because of your credit report. You are in a difficult position, because you need that new car for the new job. You have to sign the papers and deal with the higher repayments.
These are all strong indicators that your credit needs repairing. If you take the time and make the effort to improve your credit report it will benefit you in the long run.
Most credit repairs can be done by the individual, depending upon how good they are at handling money, their credit card use and how bad the situation is. If it has gone beyond that point, however,there are companies that specialize in credit restoration who will work for a fee.
You should at all times be aware of the possible signs of credit problems and if they occur, act immediately so that you are able to maintain a higher credit rating and reap the benefits.
By: Caden Flynn
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