Credit Rating - How to Improve Your Credit Rating...Importance of Credit Rating and How to Improve Your Credit Rating...Credit Rating

Credit Rating

Importance of Credit Rating and How to Improve Your Credit Rating...

 

What is a credit rating?

Your credit report contains information about how you've used credit in the past. It is a record of your payments on credit cards, car loans, student loans or home mortgages. Companies that loan money look at your credit report to determine your ability to pay back your debts on time. This is known as your credit rating.

Information on your credit report comes from companies that have loaned you money. National credit reporting agencies, also known as credit bureaus, organize the information and keep credit reports on file. Anyone who has ever used credit to buy anything probably has a credit report.

Why do I need Credit?

Having credit (you have used credit cards or loans in the past) allows you to apply for a mortgage for a new home, or finance a new car.

Basically, any time you want to borrow money from someone, your chances are much better if you have borrowed money and repaid it on a timely basis in the past.

How can I check my credit rating?

You have the right to order copies of your own credit report. There are three major credit bureaus, all of which may contain different information about you. Here are the names, telephone numbers and web addresses of the three companies:

Experian
1-888-EXPERIAN (1-888-397-3742)
www.experian.com

Equifax
1-800-685-1111
www.equifax.com

Trans Union
1-800-888-4213
www.transunion.com

What are the benefits of having a good credit rating?

A good credit rating:

  • Makes it easier to get loans with good terms
  • Makes it easier to get credit cards
  • Is important if you want to buy a home

A poor credit rating:

  • Makes it hard for you to get credit
  • Means you will probably pay higher interest rates on loans
  • Means you may be turned down for a job
  • Means you may not be able to rent an apartment

How can I improve my credit rating?

How much you can improve your credit rating depends on your situation. But you should always try to act as responsibly as possible. Repairing a damaged credit history is not impossible, but it does take time and motivation. A weak credit report includes a pattern of late or missed payments.

You can begin to improve your credit rating right away by making at least the minimum payments on time. Within a few months, your credit report will show that you are managing your credit responsibilities better, and your credit rating will improve. But it may take a few years for your rating to be completely rebuilt.

As you're rebuilding your credit history, keep the following tips in mind to help you stay on track:

Try to cut back on your spending by reviewing your household expenses and deciding which are necessary. Cut out those that are not.

Stop borrowing money and using your credit cards.

Make a plan to pay off your debt with a nonprofit credit-counseling agency, if needed. These agencies are free and are there to help you.

If you won't be able to make all of your payments, call your creditors immediately to explain the situation. Most of them will do their Fast to help you.


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