Last Updated on Mar 26, 2020 by James W
When people take credit, they are liable to pay it back within a given time frame. A credit report is a written account of the credit score of a person. By checking it, lenders know whether borrowers are capable of paying back the money they are requesting for. This is done by checking their past records and current incomes. If the report shows positive numbers, the person is deemed eligible otherwise they need to work on their credit records for improvement.
A good credit report is the key to all kinds of financial facilities available to the US citizens. This record holds personal financial information of every individual who is active financially and is involved with various financial institutions across the country.
When do you need a Good Credit Score?
A credit report functions as a financial report card of a person. Financial institutions such as banks and other lenders look into this record to make sure that the money they are lending will eventually be paid back. Many scoring systems are used to rate a person and mark his financial capabilities with FICO being the most trusted one. Following are a few points that will assert the need of a good credit report.
Getting a Job
Many companies in government and financial sectors check their employees’ credit background before taking them on board. This is a new norm but is definitely a game changing one that can decide your job opportunities.
Buying a House
US economy has suffered a lot because of a number of foreclosures and short sales. Recently, the banks and other lenders have come up with stringent conditions on credit loans, wherein you won’t get a single penny if you fail to show good numbers on your credit report.
Buying a Car
Buying a car is an expensive affair for people with poor credit score as financial institutions give you loans at a higher interest rate than usual. This may be a one off incident as many reputed banks and lending organizations don’t even provide loans to people with poor credit score.
Starting a Business
Entrepreneurship starts with investment and you need a loan for that. Once again it is about having a good credit score to make the bank trust an individual’s credibility. This point applies to both the startups as well as old businesses looking to expand through a business loan.
Getting Lower Interest Rates
Poor credit score means no loans from all financial institutions but there is a chance when the credit score is on borderline. A loan with a poor credit score is bundled with a high rate of interest, so that the bank can outweigh the risk of giving a loan to a non-credible person. Therefore, if you want a lower rate of interest rate, take time to fix your credit score first and apply for a loan later.
Three national credit bureaus (Equifax, Experian and TransUnion) maintain the credit reports and monitor how people manage their finances and if they have a good credit score for future transactions. Financial investigation on such a large scale is carried out to curb malpractices and reduce the cases of frauds between the lenders and loan seekers.
People with a poor credit score have the option to hire a credit repair service company to fix their problems and help them get into the good books of government agencies. These credit repair companies help an individual fix their credit score issues by disputing the apparent errors in their credit record by following preset procedures.
How to Repair a Poor Credit Score?
Repairing a credit score is neither an easy task nor a quick one. It takes years to remove errors from a report and credit score improves based on recent financial activities. It is always good to be careful about your finances and make feasible decisions that won’t damage your numbers.
Once the damage has been done, the only recourse is to start rebuilding it. The first step get a credit report copy. It will provide a clear picture of how bad a credit report is and what you need to do.
Dispute Errors
There is a high chance that a credit report has an error that is holding down the credit score. If you find any, dispute it and you will see a positive surge in your credit score.
Improve Financial Habits
A good credit report needs preference in terms of good financial habits. Consistent payments, good credit decisions and timely repayments are some of the key factors to boost the credit score in a few years’ time. Even if you defaulted a few years back, you qualify to be in the good books of credit bureaus if you have been paying your dues on time regularly for some time in the past till now.
Pay the Debt
If an individual has a credit that amounts to more than 20 percent of his income, his credit score gets affected very badly. It is imperative to maintain debt below your credit limit to ensure that the credit score is not damaged for further financial deals. You can do this only by changing financial habits and clearing up old debts before rolling in for new ones.
Conclusion
A good credit score is vital for every milestone in life. From buying a home to starting a business, if you come from a humble background and counting on financial help, you cannot ignore the importance of a good credit score. Work on it from day one and if you make a mistake hire a reputed credit repair Service Company to help you get back on the track.
