Now that we are in a financial mess not witnessed since the great depression, a lot of companies are now paying a lot of attention on the credit score of a person. This is especially true for financial institutions dealing in lending money to the general public. The problem is that, people only realized the importance of the credit score when was too late to make any adjustments to your lifestyle that could improve the score on the credit report. The following article by Matt Black explains the importance of the credit report not only in times of loan borrowing, but also other areas of your life.
Your credit report is simply the way in which your financial accountability is documented. It is a record of your financial history; loans you have gotten and lines of credit that you have, and if you have kept up on your payments of gotten yourself into financial difficulties. Any time that you miss a payment or make a late payment, it is recorded on your credit score. If you ever get yourself into such a tough financial situation and you decide to declare bankruptcy, your credit report will show this information for seven years.
Your credit report basically just helps institutions that are considering giving you a loan know if you are likely to repay them or not. If you are looking into buying a car or a house, or taking out a student loan, the place that you apply for the loan will check your credit first. A better credit score will help you get a lower interest rate, which will save you a lot of money over the life of your loan. And if you have a really bad credit score, you may find that no one is willing to grant you a loan at all. This is because no one wants to loan money to someone who is likely to default on their loan.
A credit score is a number that will be anywhere from 300 to 850, although almost no one actually has a score as low as 300 or as high as 850. An excellent credit rating is any score over 700. If you have excellent credit, you can generally get much lower interest rates that customers with good or okay credit. A score between 680 and 699 is good, and a score between 620 and 679 is just okay. If you have one of these lower scores, you will still be able to get a loan, but not a very good one, and you will end up paying much more over time for your loan than someone who has excellent credit.
Increasingly, credit scores are being used in more situations besides just when you apply for a loan. It has become common for your credit to be checked before you can rent a flat, get insurance, or even to sign up for a new mobile phone contract. Some employers have even started checking credit before offering employment to a job candidate. So it is important to check your credit report at least once a year, to make sure that all of the information on it is accurate. If you find that there is an error on your report, you can actually dispute it, and if the credit bureau finds that you are correct, a note can be left next to that claim on your credit report.