Anytime you apply for credit, the lender is going to pull your credit report to determine are you credit-worthy. Having good credit is essential in today’s world.
Being creditworthy is how a lender determines that you will not default on your debt obligations, or how worthy you are to receive new credit.
So knowing if you are creditworthy is what creditors look at before they approve any new credit to you.
Acceptable credit will generally get you what you want, but bad credit can be the kiss of death.
Not everyone is a good credit risk—but there are things you can do to make sure you become one.
Millions of Americans have poor credit, and many are in debt because of high-interest credit cards.
Credit card companies often target low-income families by providing them with high-interest credit cards, but they aren’t the only ones to fall into debt’s trap.
In fact, one million Americans file for bankruptcy each year. Bankruptcy isn’t the answer for everyone, but there are several things you can do to get your credit healthy again.
First, make a budget and stick to it! Get the book Household Budgeting to help you to prepare a comprehensive household budget. Save money by clipping coupons, buying items on sale, and not eating out as much.
Don’t buy something on a whim.
Go home and think about it first. Chances are you’ll never go back. Remember, buy only what you need.
The money you save can be used to pay back debts. If you have problems paying your bills, you should call the creditor immediately. If you ignore your mortgage bills, you can face foreclosure and the loss of your home.
Most lenders will work with you to help you get caught up on your bills and allow you to keep your home.
However, if you default on your car payment loan—even if it’s late on a given month—the lender has the option to just repossess the car. Staying on top of your debts will help you on the path to good credit.
As a consumer, you’ve learned the importance of establishing a good credit rating with your lenders.
Whether you are shopping for a new home or auto or searching for the best deals on insurance, your creditworthiness will be judged by your credit rating or credit score.
Checking your credit score
When banks and others want to ascertain what kind of credit risk you may pose, they will consult your FICO score before doing anything. The FICO is like a report card of your credit.
Your FICO score is a three-digit number ranging from 300-850. You actually have three separate FICO scores, one for each credit bureau – Equifax, Experian, and TransUnion.
These may not show the same score, since not every creditor reports to all three credit bureaus.
In order to make sure you see the same thing that your eventual creditors are seeing, order all three of your fico scores. Study them carefully. You look at the total score, naturally, but you also want to scrutinize the details carefully.
Maybe that rent check last year that you sent in one week too late was never registered properly. This will definitely affect your overall score.
If you do find any errors in the reports, make sure to contact those responsible for that specific record and ask them to correct the entry. If you are lucky, a couple of phone calls will make a real difference in your credit score!
A bad credit history or bad credit habits will place “black marks” on your credit profile.
These include things such as late payments, having an account assigned to a collection agency, and of course bankruptcy.
Establishing good credit habits and therefore a good credit rating will improve your creditworthiness. This will be reflected in potential lenders offering you substantially lower interest rates and better deals on credit offers.
Here are 4 tips to help you create a shining credit profile:
1) Pay Your Bills On Time
Lenders only have your past payment history on which to decide the type of credit risk you present to them. How you pay off your debts now indicates to them how you will pay off future debts.
By being patient and making smart budgeting decisions, including Debt Consolidation Strategies. You will be able to pay your creditors on time.
2) Don’t Use Too Many or Too Few Credit Cards
How much is too much? How little is too little? Many credit experts and financial planners suggest two to four credit cards is just the right mix.
3) Pay At Least The Minimum Due
Always pay at least the minimum due payment, but never less. And remember, just paying the minimum payment means it will take you years and years to pay off that credit card.
Example: Paying off a $2,000 credit payment at 18% APR with a minimum monthly payment of 2% ($40 dollars or less) will take you 30 years to pay off the amount plus interest.
4) Review Your Credit Report Regularly
Monitor your credit report from all three major credit bureaus – Experian, TransUnion, and Equifax – on a regular basis. Check your credit profile at least annually. Review it carefully and make sure that any past mistakes or disputes have been corrected.
Also, if you notice an account listed that you know that you have not personally opened, contact that creditor and the credit bureaus immediately. This could be a sign that you’ve had your identity stolen.
Request to have a fraud alert placed on your profile and account to protect yourself and your credit.
Identity theft is the fastest-growing consumer crime in America, with an estimated 1 million people victimized each year.
Establish good credit habits early in life and reap the benefits that your good credit rating will provide you for the rest of your financial future.
You also want to get a copy of your credit report from one of the three major credit bureaus: TransUnion, Experian, and Equifax. Your credit report includes your personal information, your accounts, your credit history, and whether or not you’ve defaulted on an account.
Review the credit report carefully, looking for any errors pertaining to your personal information.
Also, look at each of the financial statements to determine if there’s a credit card you’ve already closed, a debt that shouldn’t be there, or any other mistake. Contact the credit bureau immediately if you do spot any errors.
A lender determines if you’re a good credit risk by looking at your credit report and analyzing your credit score. Most people have a credit score anywhere from 300 to 750. Anything 650 and higher is considered good credit. Anything below means you’re on shaky ground.
Remember the key to creating and maintaining good credit is to pay your bills on time, and always call the creditor if you find yourself unable to pay the total bill to see if they can help you work out a plan to help you get back on track.
Are you ready to prepare your finances to see are you creditworthy? If so, check out the resources recommended to you by Inker Street Consumer Credit Advice.
- Household Budgeting: Will show you how to stick to your budget. So, soon you will have a monthly surplus, and you will see your savings start to grow.
- Debt Consolidation Strategies: When it comes to debt consolidation, you need to practice techniques that are a little unique and very much focused on getting you out of debt within a stipulated period of time.
- Debt Destroyer: Finally you can fully equip yourself with these “must-have” tools for busting debt and live a life without having to worry about debt collectors!