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
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:
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
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.
Provided as a public service by My Cash
Reducing Debt and Steps Toward Effective