Refresh your memory with those days where we get judged in schools and colleges by grades and numbers. While it was a moment of pride to patricians, for the rest of us, it happened to be a depressing period of trial. On similar grounds, credit score is yet another number which is used to assess the creditworthiness of a person. In other words, it expresses how likely a person is to repay his/her debts. In the US, it also comes under the name FICO score, which ranges from 300 to 850 points in the order of the lowest to the highest. A score of 750 or more is considered good. It goes without saying that lenders are always in a state of risk as they invest a huge sum on borrowers. As a measure of security, they would want to know the credibility of a person in repaying the loan.
However old and wise we may get; the very word ‘report’ leaves us in a bundle of nerves. Credit reports are generated based on the consideration of many factors including a person’s financial history. These scorings are issued by three major credit bureaus namely Equifax, TransUnion and Experian. While the absolute method of calculating this score remains a secret, a few other factors include the payment history, debt burden, account balances, length of credit history, credit mix etc.
But should you care? Yes, and here’s why:
Credit score has its influence in various spheres of life. Recruiters all over the world, especially in the US, conduct a background check on your credit history before hiring. Despite having a killer GPA and an impressive profile, bad credit score decreases your chances of getting hired! So, please pay attention!
Also, most of the landlords cross check your credit score before leasing out an apartment. Having a decent score gives you advantage in securing a good apartment. Of course, it also comes into play when making bulky purchases like renting a car or buying a cell phone – be it the approval of a loan or the calculation of an interest rate, your credit score plays a vital role. A solid score makes it very likely for your to get your loan, and that too with a low rate of interest.
So, how can you maintain a good score or improve a poor one?
Although it is not possible to effect an immediate improvement in your credit score, a few hacks could help you increase it gradually.
It is surprising that even trivial occurrences will affect your credit score badly. You might have to pay the annual fee of a debt that you never know existed. Or it can be a clerical error in your report that you are not aware of. You never know. These reasons might contribute to the denial of an important loan or a mortgage owing to your bad impression by the lending agencies. In short, constant monitoring and consistent repayment account for a healthy score.