If you are considering managing your debt, then one of the first things you will want to do is to know your credit score. To
people who are not familiar with the term credit score, they often assume that
this is the score that we get in our credit cards for the number of purchases
that we have made every year. But nothing is further from the truth. Credit
scores are actually the grade that you get depending on how reliable a person
is in paying their debts and credits.
Credit
scores are determined by a lot of factors, how much your outstanding debts is,
how regular do you pay for it, how much you spend and how much you earn. It
will also be determined by your past credits and how were you as a borrower.
These are all being gathered and recorded by credit bureaus and credit
reference agencies like Equifax, TransUnion and Experian.
So,
if you think, you are the only one who knows that you owe a credit card company
a big amount, think again because they do keep records and what is more, all
the credit transactions that we get are being filed for future reference of
every credit and financial institution in the country.
Credit
scores is important because it can mean being accepted or rejected for a loan.
With a really bad credit score, you may not be able to get a house loan, a car
loan, a school loan and even a credit card. In short, with a bad credit
history, your days of borrowing money is history. As an added salt to the
injury, it is not only credit card companies, lending companies and banks that
do get information from the credit scores.
Even
private companies and government agencies use this to background check a
current employee or a potential employee. You see, a credit score will
determine a person’s financial savvy and sense of responsibility. This will
also show just how much a person is willing to face up to a problem instead of
running away from it.
This
is especially true with employees that are being hired or were hired to assume
posts that deal with really sensitive financial issues or those who are
directly in contact with money. A credit history and a credit score are
important in determining if they will be able to handle the finances well.
Mobile
phone companies and credit card companies also use credit scores to determine
the clients that they should target. People who have good credit scores are
often those who have the spending power. Thus, they are good people to offer
mobile phone packages and credit card services.
In
securing a loan, credit scores are also used in determining the kind of loan
that will fit your credit profile. People who have high credit score are given
higher amounts in loan, lower interest and longer time frame in which to pay
the loan.
In
contrast, people who do not have a good credit score may be refused a loan or
at the very least be given a small amount in loan, much higher interest and
shorter time frame to pay the loan. This is because credit card companies and
lender also want to protect their interest. Low credit scores are more riskier
and therefore warrant higher interest rates.
No comments:
Post a Comment