Understanding Credit Score Ratings
If you want to be approved for a loan, you will need to have good credit score ratings. Lenders will know the score that they are looking for so you will need to ensure that you have the best credit score ratings you can; this will help you to get the credit that you want.
Understanding your credit score ratings does not need to be difficult but they can take some time. You will also need to understand what affects your credit score ratings and how you can make them better so that you are more in control of your chances of getting the credit that you are wanting.
Something that may surprise you is that you actually need some sort of credit to help your credit score ratings. This means that you need a credit card or a loan to prove that you are a good borrower. However, this is getting ahead and you should really understand how the credit score ratings work first.
Credit score ratings are between 300 and 850. The higher score you have then the better your chances are of getting the credit that you want. Surprisingly, 72 percent of Americans have a score of 600 and above and 49 percent of those have a score of 750 and higher, which is considered to be a very good score; this means that you are in high chances of getting the credit that you need at a very good rate.
Lenders are less likely to loan money to somebody who has a score of 600 or below because they are a very high risk. It means that they have landed in debt and failed to repay debt at other times. Lenders need to know that they will get the money back and they will be worried that you are not able to do that.
Only 30 percent of your score is made up by your current debt that you have. However, 35 percent is made up of the history of your payments. If you have had a lot of debt in the past that you have failed to pay off, especially CCJs or bankruptcy, then you will struggle to raise your credit score ratings. You will need to wait for these to clear, which can take six or seven years. However, there is something that you can do about your current debts; stay on top of them and clear them.
The rest of your score is made up of three different factors and some of these you can change so that you can raise your credit score ratings. The first is how long your credit history dates back to. You should have one credit card that you have been using for a long time; this will show that you have been responsible for years. The types of credit that you have will also affect your score; you need a mixture of both installment loans and credit cards to show that you are responsible for one off payments and regular monthly repayments. The new credit that you have will affect 10 percent of your credit score ratings; you should not have a lot of credit cards or loans together as it will show that you are overstretching your budget and will have lower credit score ratings.