Understanding Credit Score

Do you really understand what a credit score means, how it is figured, and how this score will impact your financial life? What is a good credit score and a bad credit score? How should be raise the score?

If you are planning to buy new home or an expensive car, then you have to check to ensure that your credit score is as high. Credit score is an important aspect of any loan process. Lenders/credit providers consider it before approving your loan application. The credit score is a calculation of points which is based on entries compiled on your credit file, these point are used to determine your creditworthiness, and your ability to repay the debt. It is very important to make sure it is accurate, before you submit a credit application because your credit report is an important part of many credit scoring systems. But before that you should know what factors determine the credit score.

It's but obvious that having a good credit score versus a bad credit score may have an impact on you when applying for your loan. Your goals should be first get your credit score up to five or six hundred and keep working on it. It takes time but it will pay off in the long run. You will get the lowest rates the higher your score the lower the rates you can get; this means you shell out less money in the long run.

The simple tips that you can use to raise credit score are:

1. Get a copy of your credit report: Initiate with obtaining a copy of your credit report is a good idea because if there is something on your report that is incorrect, you will raise credit score once it is removed. Make sure you contact the bureau immediately to remove any incorrect information.

2.Pay Your Bills On Time: Keep in mind your payment history makes up 35% of your total credit score. Paying your bills on time is a the best way to start rebuilding your credit rating and raise your credit score.

3. Pay Down Your Debt: Lenders also like to see a lot of space between the amount of debt on your credit cards and your total credit limits. So the more debt you pay off, a wider gap will increase credit score very fast.

4. Don’t Close Old Accounts: In the past people were asked to close their old accounts they weren’t using. But in the current current scoring method that could actually hurt your credit score. Closing old or paid off credit accounts lowers the total credit available to you and makes your balances appear larger in credit score calculations. Closing your oldest accounts can actually shorten the length of your credit history which makes you less credit worthy.

5. Stay Out Of Bankruptcy: ‘Bankruptcy’ is the most scary term in regard to credit score. Since, bankruptcy will lower your credit score by 200 points or more and is very difficult to come back from; it is the worst thing that will destroy your credit score.

In this way you need to repair your credit entails getting rid of the negative credit report information and catching up on your overdue bills.

If you want to learn more about how to improve credit scores, the author of this article recommends Credit Umbrella.