Your Credit: And Overview Of What It Is & What It Means
Your credit is a very important piece of information about your borrowing and repayment history. When you want to obtain a loan fro any reason, the lender will first check out your credit history by obtaining a copy of your credit report from one of three credit reporting agencies – Equifax, TransUnion and Experian. The merchants and lenders with whom you do business report to these agencies on a monthly basis and a lender can see at a glance if you have a history of defaulting on your loans or being late with your monthly payments. Your credit consists of all the bills that you owe. The report provides details on the amount of each payment and the due date each month.
The most important factor that affects your credit is paying your bills on time. Since your report also contains information about whether you have any loans paid in full or whether there are court judgements against you in an effort to get some back payments, it is important to pay your bills on time. Bankruptcy is a very serious item to have against you and it will take at least 11 years before it gets removed from your report.
Applying for credit at three or four places is not favourable, even if you are approved at each place. This gives a lender the impression that you are in financial difficulty and that you need money from one loan to make payments on another.
Your credit is also rated on your payment history. Those with excellent credit do not have difficulty getting loans because they are a good risk to repay. Excellent credit also means that you get a lower rate of interest. If you have a bad credit rating, it does not mean that you cannot get credit. It means you will probably have a harder time getting approval for a loan and that you will be charged a higher rate of interest because you are seen as a poor risk.
If you have bad credit you can work to repair it. Lenders look favourably on you when you apply for a consolidation loan to pay off all the other bills you have and consolidate them into one easy payment. Quite often this payment is less than the sum of all the other bill payments that you have.
You can also make arrangements with creditors to accept a lower monthly payment or set up a different schedule. This is also noted on your credit report and is there for any lenders to see.
Your credit is very important and needs to be protected. For this reason, you should request a copy of your credit report at least once a year to ensure that the information it contains is correct. This also ensures that no one is falsely using your name when applying for loans and not repaying them. If you notice incorrect information, you should immediately contact the credit reporting agency to take steps to have it corrected and removed.
You need to be aware of your credit at all times and to know what each section of the report means. One of the things that people often skip over and don’t pay much attention to is the address given on the report. You have to make sure that this correct. Your credit report gives former addresses that you have had. Having many addresses gives lenders the impression that you skip out on paying the rent and are not reliable enough to settle down. It actually tells more about you than you are often aware of.
Credit is something that is hard to live without in this modern age. The cost of items that we need are so expensive that the only way we can afford them is to take out a loan or obtain a credit account at a department store. It is equally important that you do not abuse it.
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