Your credit rating is the most important tool to avail loan and to retain or enhance your purchasing power. This is the tool that is equally useful for the lender to know how safe a borrower you are and how much their loan amount is at risk when you borrow from them.
The health of your credit score depends largely on your loan repayment structure. If ever it is hurt you must focus on rebuilding it with positive debt management activities. Therefore, it is important that you know about the working process of such credit rating and the useful ways in which you can rebuild your score if at all it is harmed.
The Useful Elements
There are a few important facts to know about your credit rating especially if you are thinking on the lines of availing a loan to consolidate your debts and ease your tight financial situation.
- Firstly, you must know the elements that make a proper credit report. Ideally, such report contains all information about your credit transactions.
- It also contains your personal information.
- Apart from your payment history, your report will contain information such as debt management plans, public information of bankruptcy filed at any point and proposals.
- The credit report also includes information of your loan accounts and when you opened them, the amount due and even payments made on time and those that you missed.
- If your account was sent to collection ever or if you crossed your credit limit at any point of time, it will also be included in the credit report.
Most importantly, debt settlement ratings are mentioned in bold, so to speak as it hurts your credit rating the most and for a long period of time.
Different Departments Involved
The different activities and involvement of different departments will ensure that your credit report is updated and in precise.
Credit history is provided to the credit bureau by the lenders for updating after every 30 days.
Any information regarding bankruptcy or proposal is provided and included by the Office of the Superintendent of Bankruptcy. It includes the time of filing as well as its discharge or completion.
Obtaining A Copy
To obtain a copy of your credit report, you do not have to pay any fees. According to the law, you can obtain it for free from sources such as Trans Union and Equifax. Ideally, you are entitled to receive one free copy of the credit report that will not include your credit score every year.
However, if you want to review the credit report more often the best you can do is to obtain one from Equifax now and another after six months from Trans Union. You can continue it alternating after every six months with the separate credit bureau.
There may be errors and omissions in your credit report such as incorrect mailing address, credit accounts, payment details, debt settlement ratings, social insurance number and any of your personal information. If you notice any discrepancy, you must get it corrected by informing thecredit bureau furnishing valid supporting documents along with.
Factors Affecting Credit Rating
There are a few basic factors that will affect your credit rating apart from debt settlement. These factors are:
- Your payment history showing whether or not you paid your monthly bills on time
- Credit utilization to show how much credit you use and your limits
- Length of each credit account that you have or had
- Positive experiences with credit
- Your tenure of stay at the current address or job to indicate your stability
- The type of credit such as terms loans, lines of credit and credit cards and
- The number of credit inquiries.
Apart from the inquiries by the lenders and creditors, all other factors must be more in order to have a good credit score.
Unique Features Of Credit Report
The features of a credit report are unique. The most significant of all is the credit rating. This may be starkly different from the one your lender has. This is due to the fact that the lender orders for a credit report that is designed specifically to meet their interest and purpose. It is possible that they put more weight on specific factors depending on their reasoning and assessing the worthiness of your credit.
- In addition to that, the lender may have access to scores that you will not have such as the bankruptcy score.
- The number of credit applications determines your credit score as well. If you apply for too many loans in a short period of time, the lender will inquire about the matter.
However, a good thing about the feature is that lenders or landlords can only access and assess your credit report only if you give permission to them.
Factors Having Negative Impact
The most significant factor that will have a drastically negative impact on your credit score and thereby determine whether or not you are eligible for a loan is the amount of debt that you have. If you have multiple debts, make proper plans to pay it down. If you do not have any decisive and productive debt management plan, then you may contact with experts to review all your available options.
Other factors that will have a negative impact on your credit score include moving from one address or job to another frequently.
Ideal Credit Score
You will need to maintain a perfect credit score if you want to avail faster loan approval and higher amounts. Though the limits may vary from one credit scoring agency to another, the usual range remains almost the same, give and take a few.
- Anything between 300 and 600 is considered to be a very poor rating
- Above six to seven hundred it is poor
- Till 750 it is good and below that your score is just fair enough for a debt approval.
However, anything in excess of 750 is considered to be very good credit rating to avail any loan, secured or unsecured. Therefore, keep building your credit score to create better debt opportunities.