A Good Credit Score
Can Affect More Than Just Your Financial Future!
Obviously, a good credit score is quite important. If you plan on buying a house or car sometime in your life, its best to plan ahead and get a good credit rating. Remember, its your life and its up to you to get your credit score to a healthy level.
You require a good score to obtain the best rates when you decide to buy a car or a home, lease an apartment, get a good job or purchase insurance.
Your credit history can determine a lot these days. If you make a single mistake, it can turn up to haunt you in many ways, some of which you may be unaware. Yet what is a good score?
Understanding the basics of credit scoring or what is a good credit score.
Simplistically stated, a good credit score is what credit providers e.g. banks, loan companies, look at to decide whether you are a satisfactory applicant for credit or not. The score tells them if you are capable of paying back the loan or the credit card.
A number of factors determine your credit score. A formula measures the risk of default by taking into account such factors as punctuality of your past payments, the amount of debt you have, the length of your credit history, the type of credit you use and your recent credit search history.
The various credit companies have their own particular formula but, essentially, they use the same basic elements. At their basis is the risk of default. In all the systems, each particular component scores a specific percentage. If you obtain a high percentage, you have a good score.
There are hidden factors to consider. How long is the length of credit history used? How great is the impact of bankruptcies and foreclosures and adverse judgments? The formulas used do not provide specific answers.
You can bet, however, the chance of you obtaining a loan, mortgage or other form of financial support decreases if you are substantially late with your payments or have, at one time or an other, forfeited a mortgage.
Lenders also take into consideration two other factors when deciding whether to give you credit. They, give specific weight to your current income and employment history.
These are additional factors not to be forgotten. You must see them as a supplement to your credit score. If you have a good score but lack these two aspects, it may affect your ability to obtain a loan.
How to obtain a good credit score.
If you want to obtain the highest possible credit score, you should consider implementing the following:
- Pay promptly
- Limit the spending on your credit card
- Pay at least the bare minimum monthly payment on your credit card balances
- Do not permit your credit card balances to become more than one-third of your available credit total
- Do not open more credit accounts than necessary
- Spend within your budget
- Keep your accounts stable. Avoid closing old accounts and opening new ones.
If you adhere to these simple instructions, your can achieve a good credit score. One further point: you can legally obtain your credit score.
The Fair and Accurate Credit Transactions Act (FACT) allows you to access once every twelve months a free copy of your credit report. Utilize this source before you venture into the credit market.
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