These days, it's not just loan lenders that
check your Credit Score. Employers look at their potential employees'
credit scores in the pre-screening process. Even landlords and
insurance companies have got in the habit of checking Credit
scores of their potential customers. If you have a low credit
score, you are considered a high risk to lenders and have lesser
chances of being granted credit. If you are indeed granted credit,
you will have to pay higher fees, higher interest rates, etc.
Apart from your credit score, lenders also
look at your annual income, length of employment with your current
employer, # of years you have lived at your current residence
and the amount of debt you carry. It is actually thought that
that 1 credit Score has made the entire concept of Credit Reports
useless. Rather than analyzing the long and complicated Credit
Report entries, lenders will simply look at your credit score
and rate you on a scale from R0 to R9. More can be read about
this rating at Importance of Your Credit Score (http://www.3debtconsolidation.com/credit-rating-importance.html)
The factors that mean most to your credit
score is your public records - any judgements against you, liens
and any bankruptcies you have declared.
Checking Your Credit Score
Check your credit score 6 months before you
apply for a big principal loan. If your credit score is low
or medium, atleast this gives you 6 months of time whereby you
can improve your credit score. Read this article for more analysis
on this: How to Improve
Your Credit Score - 4 Basic Things
Check your credit score a few days before
applying for your loan as well, and print out these results.
This is because when the lender checks your credit score upon
your loan application, the # he gets may be slightly different.
This is OK because some lenders will print out a different version
of the FICO score or industry specific FICO score. However,
this # should be very close to the Credit Score that you received.
Glinda Bridgforth, author of Girl,
Get Your Credit Straight! quotes, "It's important
to be patient with the process when it comes to increasing your
credit score. Once you've fixed all errors, are paying your
bills on time, reducing balances by paying more than the minimum
payments and lowering interest rates as much as possible, be
patient and let time work to your benefit. I know it can feel
like you're watching grass grow, but if you're consistent with
following these healthy habits, your credit score will definitely
increase and you'll be well on your way to getting your credit
Components of Your Credit Score?
The 5 components that make up your Credit
- Previous Credit payments & performance
- Current debt load
- Your past average credit length or history
- Types of credit available to you
- Your applications for new credit
In the graph below, we summarize the importance
of each of these items in percentage format, with the total