Nobody wants to live on credit. In an ideal world, we would all live within our means and even have savings. However, the reality is, there are times when what we need to get done can only be achieved with the financial assistance of a loan.
Many businesses are aware of this reality. They are also aware of the fact that much as a lot of people need the help, not all are capable of honoring their word on paying back. This is why they have rules on who is qualified for a loan and who is not. One of the most reliable ways of determining a person who regularly pays back their loans and who is, therefore, reliable is by checking their credit score.
What Is a Credit Score?
Simply put, a credit score is a numerical value given by Credit Reporting Bureaus that sums up your credit report. The number is determined by how well you have been able to pay your loans in the past, and how many they have been. This number is what lenders use to determine your credibility before they consider lending you money.
How to Check Your Credit Score?
Having a bad credit score can not only lower the level of loans that you get, but it can also completely bar you from accessing a loan from any legal lender. That is why it is important to ensure you are aware of your credit score.
As previously mentioned, your credit rating is regulated by Credit Reporting Bureaus in your country. These bodies offer you one free report per year, and some offer you another report a few months after you request for a loan and are rejected. If you need any other reports besides these, you will need to pay according to the credit reporting body you choose to use. It is important to note that generally, once you request a credit report, you have to wait 10 days or so to get it. However, when you need it urgently, you will need to pay a fee that is stipulated by the body in question.
In order to get a consumer reports credit score, you will need to show some legal identification. This can be in the form of a passport, national ID card (if your country uses one), or any other legal identification that shows your full name, date of birth, address, and other pertinent information. This information is what these bodies hold as your identification. As such, it is important to check in with them if you fear that your identity has been stolen. Beyond identity theft, you should ensure you monitor credit score at least once a year, or at least any time before approaching a company for a loan.
Score Level to Qualify for a Personal Loan
This may vary in different regions, and even across different bad credit lenders. You will need to ask the lender the credit number they require. However, you should aim at having a credit score of above 600. Some studies show that most creditors offer lower interest rates to borrowers with credit scores of above 600, while offering far higher rates to borrowers with credit scores of below 580. This means that you will end up spending a lot more money paying off your loan when your credit score is lower, than if it is within the preferred range. It may even take longer for you to pay off the loan in such a case. It is, therefore, important that you try by all means necessary to keep your rating from going below the 580 mark. This can be achieved by ensuring that you only borrow when completely necessary, and only borrow amounts that you can handle, on terms that you can adhere to. Only bite that which you can chew. In order to be fully ready, get full details on the interest rate given according to different credit ratings. This will help you decide how much to borrow once you know your credit score.
How to Improve Your Credit Score?
If you discover that you have a poor credit score, fret not, you can improve your rating by doing a few things:
- Honor your word. There is no other way of saying that. Keep to the terms of the loan agreement by paying your instalments on time and in full.
- Keep checking your score. This will help you know when you are losing points even unintentionally. In some rare cases, borrowers do not get their monthly statements for credit cards and such other bills. You, therefore, end up missing payments without your knowledge. This still reflects with the credit reporting bureaus, lowering your score. If you keep checking regularly, you are able to correct this in time.
- Report identity theft, or even suspicion of it as soon as possible. When you lose any legal documents that contain your personal details, report this immediately to prevent you from being responsible for any expenditure that may result due to identity theft.
- Avoid credit altogether. As much as it helps, try to avoid credit when possible, and only seek out credit options when it is completely necessary. This includes the use of credit cards, monthly subscriptions that may not be necessary, and so on.
Conclusion
It is clear that there are a number of rivers, oceans even, that a good credit score can help you cross. However, you need to ensure that you keep a great score at all times in order to enjoy high credit rates and low interest rates. At the end of the day, ensure that you only borrow a percentage of what you earn so that you are able to pay off your loan in the given time. Happy borrowing!