Are you in need of a loan, but you have been told that your credit score wasn't high enough? Aren't sure what a credit score is? A credit score is the credit rating that represents your credit worthiness. It is calculated by a statistical model. Loan processors will use your credit score to determine the likelihood of you repaying back your loan or failing to repay it over an estimated period of time. Where does your credit score come from?
Your credit score is normally based on information that can be found in your credit report. Banks and credit card companies use this score to determine the risk involved in lending you money or extending you credit. There are several things that lenders will use your credit score to determine.
A few examples of the possible uses are in determining if you qualify for the loan, determining what your interest rate will be, assigning you a credit limit, and managing any accounts you already have open. This will also tell them how to treat your account if it has already gone into default. There are several types of credit scores, but the most widely used in the United States is the FICO score.
FICO stands for Fair Isaac Corporation. This company developed the mathematical formula that is used to calculate your credit score. This score is one of the most important factors in determining your credit worthiness in the United States.
How do you know if your credit score is good enough? You can access your credit scores online at the FICO website. It will only cost you about $45 to access this information and you will be thankful you did. You'll be ahead of the game by knowing this information before you apply for any loan.
There are many different things you can do to obtain an improved credit score after you have had a bankruptcy. Most lawyers and mortgage companies will tell you that you need to wait three years before you can start to improve your credit scores and obtain better loans. While to a degree this is true there are things you can do immediately to improve your credit scores.
First it will be difficult to obtain a great loan on anything, but it is not impossible. You will have a high interest rate, but in order to improve your credit score you need to start establishing a good credit report. The only way to get the credit report back in favor is to have credit. You will need to find a credit card company that is willing to give you a credit card. Do your research. Find the credit card company that will offer you the lowest interest rate. While it may be high it is still important.
You should not use the credit card, except once a month. If you use the card to fill up on gas once a month and paying off the balance you are showing the credit reporting agencies that you are establishing better credit and therefore you will be a better risk down the road. Companies look for a steady monthly payment that you are never late on. They are also looking for a credit limit.
If you are showing a company that you have a credit limit and are responsible your credit score will begin to rise. The same applies for a car loan. If you have a car loan that you pay on time every month your credit score will soon increase.
The bankruptcy will keep your back on your credit report, but after three years you can start to remove some of the bad credit reports helping you to increase your credit score.
Both Ken Charnley & Himanshu J. Joshi are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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