Author: Richard Greenwood Added: August 31, 2008
If you've tried applying for a loan recently then it's likely you will realise that having a good credit score is crucial to get approval and get an attractive interest rate. However, credit scores are now beying used by many other companies including insurers and even potential employers to assess your risk. The impacts of a bad credit score can be life changing and it pays to know how to keep your credit score in the right range. In truth, your credit score holds a much larger influence on your life than you may realize. Credit scores are hard to escape and will be with you throughout your life. This will influence the interest rates you pay on purchases through to approval for major loans such as a home loan. Once you realize how important your credit score can be for your financial portfolio and lifestyle, it's integral that you take steps to understand and improve it as much as possible. Your credit score is your financial report card. Any financial record that has your name on it will have an impact on your credit score. Conversely, if you are just starting out and have few financial documents with your name associated with them, you might have a lower credit score simply because you do not yet have a strong credit history. Credit cards can be either your best friend or worse enemy with your credit score. If you are young or just starting out independently, it is often recommended that you secure a credit card to begin your credit history. By establishing a low-interest, low limit credit card, you can start to build a strong credit history by paying off your bills each month. In addition, putting your name on the utilities or establishing a good record of payment with your rent or mortgage can also increase your credit score. When you apply for a credit card in the future or wish to lower the interest rate on your current credit card, your credit company will first look to your credit score and payment history. If both are strong and in good standing, you might enjoy a lower interest rate. You may find yourself rejected because of a low credit score caused by falling behind on your loan repayments or holding excessive amounts on your credit cards. It's important to understand that using a credit card wisely can help you, but taking advantage of the credit card debt will destroy your credit score in the long run, affecting numerous future financial purchases. When you go to buy a home, for example, the bank providing the home loan will consider your credit score before approving your loan or giving you a lower interest rate. In addition, if you plan to purchase a new car in the future, the car loan amount will also depend on your credit score. It can be life changing to take a positive stance and be in control of your finances by understanding your credit score and how to improve it. Don't put it off, make sure you start putting these tips into action today.
--- Richard Greenwood - Director of Online banking magazine The Money Web. The free online magazine features articles from a wide range of finance insiders to provide excellent tips.
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