Did you know that each time you take up any kind of credit or loan, or pay one back, it adds to your credit rating. Who keeps a record on you will vary according to where you live, but the three major credit reference agencies are Equifax, Experian and Trans Union. They will supply your credit rating to any business that is considering lending to you.
What Does Your Credit Rating Reveal.
All your current debts are incorporated in to your credit rating. Believe it or not there is a history of all the debts you've had in the past ten years or so, and special note is made of anything that has gone wrong. A Default (missing a payment) on any debt can damage your credit rating. Borrowing a lot before you start paying anything
back will make you seem like a very bad risk, as will going all the way up to (or even over) your limit on a credit card.
It's also worth bearing in mind that the credit reports of anyone you live with may be linked to your own report, and in turn could reflect badly on you - your partner's credit rating is coupled to your own quite intimately.
How Your Credit Rating is Worked Out.
'FICO', named after the Fair Isaac Corporation, who invented it, is the most common method of coming up with your rating. Your present credit status is prioritised thus:
1: Whether you've paid previous debts
2: How much debt you now have
3: Your credit history
4: What types of debt you use
5: How many times your credit rating has been checked of late
Things that happened in recent times are given more weight than things that happened a while ago.
Your Credit Rating is Significant.
Each time you get declined for a credit card or any other type of loan, the odds are that it was because of your credit rating. Companies handing over small loans are far more probable to rely entirely on this rating than to bother checking your income, and a poorer rating will mean that you are offered a higher interest rate.
Your rating is important when you get mortgages, loans or car finance too. You wouldn't want to find a house you love only to get declined a mortgage thanks to your habit of paying your credit card bills late.
How Do You Check Your Credit Rating.
Credit reference agencies are not allowed to hold your information on file without disclosing what it is they have. If you write them a letter and pay a small fee, they must send you the full credit report they hold on you.
You can then look over your credit rating and contact them if you discover something that is incorrect. You might find an error has made you look bad or there is a mistake. They store anything you report in your file.
It is possible in some countries to sign up and get credit reports frequently for a small fee, or even free!
Check your local laws to see if this is possible.
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