Five Reasons Why You Should Improve Your Credit Score
Five Reasons Why You Should Improve Your Credit Score
Ever wonder how local electronics stores can offer you instant credit? Ever wonder why you are advised to keep your credit history clean? It's because they will be used in case you want a new credit. And that is how you are offered instant credits as mentioned above. But how is it that a lender can know whether you paid your earlier credits or not? Do they have access to your credit report? No. but they have access to something else, which is your credit score.
Your credit score is a three digit number ranging from 300 to 850. This is a score created by the lenders and used by the lenders. There is one main (and many other) versions of credit scores known as FICO score, developed by Fair Issac Company. Although how this score is exactly commutated is something nobody knows, but it is essential that we know why it is so important.
The top 5 reasons why one should improve his or her credit score are listed below:
I. A credit score is solely based on race, sex or ethnicity and that is why it is considered to be the most objective tool for the lenders. Your credit card score explicitly tells whether or not you are eligible for a credit.
II. The only thing lenders are concerned about is whether or not you will pay your credits back. A high credit score means you are eligible while a lower one depicts otherwise. When you apply for credit, the lenders and creditors use this number to make a quick demission of credit or non credit. So improve your credit score if you want to be eligible for a credit of your choice.
III. Credit scores also make an impression on the rate of interest. The higher the credit score, the less is the interest you will have to pay on a credit. So improving your credit score can really help you.
IV. Improvement of your credit score is important if you desire a greater amount of credit limits. This is because your credit score is one of the tools the creditor makes his/her decisions upon.
V. The final reason for why to improve your credit score is that a credit score even decide how much a commodity costs. Your low credit scores may result into higher price tags for some commodities such as a new car and a student loan.
The main parameters that define your credit score or act as simply the basis for calculation of your credit score are payment history (35%), previous and current debt level (30%), length of credit history (15%), injuries i.e. total number of credit applications (10%) and mixing of credits (10%). Improving these areas can improve your credit score significantly.