With finance driving the market, credit is an important instrument that keeps trade and transactions moving. Credit scores are an important part of credit and having good credit scores speaks highly about the borrower. Credit scores keep fluctuating according to the borrower’s repayment capacity. There are many important reasons to have a good credit score. It’s imperative to get a free credit score check. However, five main reasons are provided to ensure that borrowers try to maintain a good credit score, as it positively affects their lives.
1. Credit scores and loans
With all financial institutions seeking credit scores as a base to issue loans, it is important that each person maintains good credit scores. These scores are going to speak for you, when you need money; these credit scores will help in sanctioning the money and these credit scores will determine the interest rate charged on these loans. By getting a free credit score, borrowers can know where they stand, in terms of getting loans sanctioned, which positively impact their lives.
2. Credit scores for financial institutions
Some factors that determine the credit score of any individual are the credit record held by the borrower over a period, his income, his overdrafts, his repayment records, etc. By tracking these factors, credit bureaus provide the credit score of a person. These credit scores are used by financial institutions, to determine if the borrower can be lent the amount and to estimate the repayment capacity of the borrower. FICO credit scores are the most prominent scores used as yardstick, currently. The credit scores are also determined by various credit bureaus such as Experian, Equifax, Transunion and many others.
3. Credit score to know credit standing
Each credit bureau uses its own method of keeping track of credit scores of individuals. Hence, the credit scores tend to be different when quoted by various credit bureaus. Although many financial institutions depend on FICO to check the credit score, as they are considered one of the best bureaus, there are other credit bureaus that provide their own credit score. Each credit bureau calculates the credit score, according to their terms of calculations. To check the credit score of the borrower, credit scores of one or more bureaus are checked by the lender. Hence, the borrower should always check on his credit score from one or more credit score bureau’s to know his true credit score and try to keep it at a good score.
4. Healthy individual credit scores
The credit score ranges are usually found between 300 and 850. An individual who is able to maintain a score above 720 or 750 is said to have a good credit score. A person with a good credit score can obtain a loan easily from strong financial institutions, such as banks, which charge a comparatively lower rate of interest. A person with a poor credit score cannot obtain loans easily and if they get loans, they are charged a high rate of interest, as the lender has to bear the risk of not getting repayment of the loan amount. Hence, if a person requires a loan, he should try to improve his credit score, to get loans easily and to receive lower interest rates. The credit score is an individual score.
A person cannot make use of the spouse’s credit score to get loan for him. However, if the loan is taken jointly, the credit score of both the spouses will be taken into consideration. The best solution to get a healthy credit score is to work together, to decrease credit rates, make payments on time and bring down the total credit payable by paying the loan amount together.
5. Boosting the credit score
The credit score of a person will improve, if the borrower keeps his payment prompt and utilizes less credit on his credit card. Do not over-use the credit available. Use credit within limits, so that your interest payable is nil or at a very low rate. Make sure that loan defaults are not made. By paying all bills on time, the credit score will improve. By making prompt payments, no negative markings enter into the account of the borrower and his credit score will always remain high.
At times, wrong information may be taken up by the credit bureaus, which may result in low credit score. Hence, if the borrower is in need of a loan, he should always check if his credit score is tracked properly. Misinformation and wrong information should be immediately rectified. This can be done, only if the borrower keeps track of his credit score and his credit report.
Credit scores help financial institutions to make decisions on whether or not to issue the loan amount, to the borrower. These credit scores are just records of the payment history of the borrower and the credit utilized by him. However, a top credit score does not mean that the borrower is sound financially nor does a poor score mean that he is at his lowest ebb, financially.
The parameter that shows the financial strength of a person is his ability to earn, his ability to balance his expenses with his income and his ability to pursue ahead with a positive attitude, even when the going is tough. To learn more about free credit score, you can always sign up for free at Credit Sesame.
By using such free information on credit scoring, you can know your borrowing position and make arrangements to avail loans from lenders who are willing to give loans to such credit scores. Banks and other established institutions provide loans to those who have good credit scores, while there are other lenders who are willing to provide loans even to bad and poor credit scores, though the interest charged is high. By getting free credit score checks, individuals can gain more confidence about their borrowing capacity or in the case of a poor score, he can make arrangements to improve his credit score before applying for a loan. It is in the interest of such borrowers that free credit scores are available.
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