Introduction To Credit
Put simply, credit is the reputation for repaying debts on time. The better your credit, the more willing companies and people will be to lend you money, issue you a credit card, rent a house or apartment to you, hire you, or provide services to you on favorable terms.
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Credit reporting offers great benefits to you. By managing the level and amount of credit you take on, you can potentially save on loan costs because lenders will be more competitive with their rates for applicants who have a good and stable track record. We help you by recording and reporting to the lenders how well you have repaid your past debts, thereby, when you apply for more credit, the lender can quickly have access to your healthy report card and make a quick decision to approve the application.
Good credit doesn’t require a spotless payment history, but poor credit, once established, can be difficult to escape. When you apply for a credit card, personal loan, or any other type of credit, the lender must decide if you are a good credit risk. Creditors do this by checking your background to see how you’ve paid debts in the past. However, a poor repayment history will not help your cause.
To determine if an applicant is a good credit risk, most lenders use a scoring system. Applicants receive points for factors such as type of occupation, length of employment, and annual income. Applicants may also receive points for the number of previous or current creditors who have rated their credit payment history highly.
If you are deep in debt and are applying for more credit, a creditor may consider you to be over-extended and deny your application, believing you may not be able to handle additional payments based on your income and existing obligations. In this case, your loans officer is concerned about your best interest and not about making the sale. You should make every effort to pay off and/or consolidate as much debt as quickly as possible so as to avoid paying excessive amounts of loan interest.
When you apply for credit, each creditor may access your credit report. Their inquiries will be recorded in your file. Some creditors automatically reject an applicant if their credit report shows an excessive number of inquiries over a short period, believing from experience that good credit risks usually don’t have many credit inquiries. A record of inquiries will remain on your credit report for as long as five years.
If you have committed yourself to relatively few creditors and have maintained a high credit rating, lenders may look at how long your credit commitments with those creditors will continue. If you are near the end of your current commitments, the lender may consider extending credit to you because your income-to-debt ratio will improve at the end of your current commitments.
Once you know what lenders are looking for in the credit report, you can use this to your advantage by making your credit report as attractive as possible by paying loans on time and by paying off high interest small loans and credit cards, etc. This way you can control the outcome of your next loan application and save money at the same time by having a good report.