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How can your credit affect your life?
If you want to borrow money, get a credit card, buy or lease a car, purchase a house or even rent an apartment, you will be subjected to a credit check. That means that the lender, car dealer, etc. contacts the local credit bureau to find out your credit score. This three-digit number greatly determines whether or not your credit application is approved.After the approval, the credit score (the most commonly used credit score is called FICO) also is used to determine the interest rate and other terms of your credit agreement. The higher the credit score (usually 700 and above is good), the better the terms and lower the interest. A lower credit score would mean higher interest and a less favorable repayment plan.
How do you give yourself good credit?
Building good credit is simple but not easy. Though there is no one thing you can do to insure good credit, here are the basic, long-term steps:- Pay your bills on or before the date they are due. This shows that you are conscientious about fulfilling your contractual responsibilities.
- Keep your account balances low. This shows that you are cautious about borrowing.
- Apply for new credit only when necessary. This shows that you are sensible in your use of credit.
Improving Credit Quickly
Obviously, these steps take time. Suppose you're contemplating a large purchase, like a house, and want to get the best terms soon. How do you improve your credit quickly? Again, here are some things you can do:Verify Your Credit Report
Get a copy of your credit report. Everyone in the US is eligible for one report from each credit bureau at no cost once per year. You can then use the reports to make a good estimation of your FICO score. However, people often prefer the convenience of an all-in-one credit report which combines the reports and FICO scores from all three major credit bureaus.If the score is 700 or more, you needn't worry. If the score is lower, you should try to improve it.
Check your report for mistakes like late payments that were actually on time, accounts that aren't yours, and paid off debts or credit cards that are still showing on your report. Notify the credit bureau of the errors and be sure they are corrected (you can now usually do this online or over the telephone if you don't want to take the time to write a letter).
If you're in a super-great hurry to perk up your credit score in anticipation of applying for a mortgage, for instance, you can contact a lender who is a member of a rapid rescoring service. For about $50 per account, the service will correct any error on your credit report within about 3 days.
However, be wary of any service that promises to remove accurate negative information from your credit report. Oftentimes, these services are scams. For legitimate help rectifying problems on your credit reports, check out this credit repair companies.
Tips for Boosting Your Creditworthiness Fast
- Pay down your credit cards balances both to raise your credit score and decrease the amount of interest you are paying. This is the quickest way to improve your credit score.
- Keep unused accounts open, particularly if you have had them for a number of years. Although you would think that having fewer credit accounts would help your credit rating, it doesn't. In fact, long-standing accounts give you an established credit history that appeals to lenders. Meanwhile, suddenly closing an account right before applying for credit can look bad. Close any accounts you no longer want well in advance of applying for credit.
- Spread out your debt over several sources to even out your credit usage. It looks good when you are far away from your credit limit with each of your credit cards and other credit accounts. Again, this shows how well you can handle credit payments.
If you've had credit difficulties in the past, DON'T PANIC. Bad credit can be repaired. Check out the "Bad Credit" article on this website here.
If you do have good credit, congratulations! Good credit is an asset that can help you get the things you want in life. Work hard to maintain your favorable credit rating. You'll be glad you did.
