The following is a post on behalf of Money Supermarket:
Many people have incurred debts in recent years. Debt by itself does not affect credit scores, but missed payments or defaults on loans can have a huge impact.
A lot of individuals are now forced to obtain credit cards for bad credit because they cannot get a regular credit card.
Credit card companies and loan institutions like to see people making regular payments on all loans obtained. If the loan is paid off in the specified time, or even earlier, this is a sign that the individual is a good credit risk.
There is a trend among lenders to approve credit if the applicant has a credit score of 660 or higher. However, around 40% of Americans have a credit score that falls below this number.
It is likely that 4 out of 10 Americans will not be approved for car loans or mortgages. Those that are approved will only be able to obtain secured credit cards and be forced to pay high interest rates.
Credit scores basically control a consumer’s access to all types of loans. There is usually a very fine line between being denied and being accepted for a loan, so it is important for everyone to take charge of their credit score and try to improve it when possible.
New Rules for Everyone
When credit scores are low, it may be possible to obtain a loan or mortgage, but the interest rate will be a lot higher than for someone who has a good credit score. Do you know your credit score? The fact is, everyone has access to their credit score.
There is a new federal regulation that stipulates that all consumers must have free access to their credit scores. The three major credit reporting companies all have websites that allow people to download their credit report.
This is a good place to get started if you have been denied a loan and are wondering why. Check the report to make sure that it is accurate and up-to-date.
If there is incorrect data showing on the report, it’s important to contact the credit reporting company immediately so this can be corrected. With the report in hand, it is easier to see what could be causing the loan refusals.
Raising Your Score
Paying off old debts is a good way to raise your credit score. Another way to raise your score is to make sure that all bills are paid on time and rental or mortgage payments are made every month without fail.
If you already have a credit card, it’s a good idea to pay more than the minimum required payment every month. This shows loan companies that you are serious about paying off your debts.
Holding a steady job is another element that loan companies look for and like to see. It tells them that you are reliable and that you have a monthly income that allows you to cover all loan debts incurred.
Obtaining credit cards for bad credit and then paying them off as quickly as possible can improve credit scores.
These are some things that can be done to raise your credit score. Remember, the higher your credit score is, the better the loan terms will be.
Photo By Linas V