Credit Affects You! See How?

How Your Credit Score Affects The Interest Rate You Receive

Of course, you know that the higher your credit score is, the better interest rate you will get on your credit cards and loans, whether that be for a mortgage, car loan, consolidation loan, or any other type of loan you need.  The reverse is also true; the lower your credit score, the higher interest rate you’ll have to pay.

The interest rate you get is important because it has the potential to save you thousands of rupees.

3 Ways Your Credit Affects You That You May Have Never Thought Of:

Most of us understand the relationship between credit score and interest rate received.  However, there are many other ways your credit score affects you that you may have never considered:
                                 

Rate for Car Insurance.  Crazy, right?  Your credit score can affect your car insurance rate, but it is just one of the factors that are used to determine your insurance premium.  Insurers create a credit-based insurance score that is computed by looking at your credit history, geographic location, age, driving and claims history, among other things.

For the credit portion of your insurance score, these factors are important: payment history, including delinquencies or late payments; length of credit history; and types of credit, such as credit cards and loans.  The good news (if you have a good credit history) is that about half of existing customers receive a rate decrease based on credit score.. The opposite is also true.  Those with lower credit will likely pay more.

Ability to Rent an Apartment.  Put yourself in a landlord’s position.  Would you want to rent to someone who had a high likelihood of not paying and that you would have to spend months trying to evict?  That doesn’t sound like a good time, not to mention all of the money the landlord would lose while the tenant is not paying.  For this reason, more and more landlords are checking credit scores before renting to people.

Job Prospects.  How you handle your credit and how you perform at your job should be two separate issues, right? Not so for some employers.  An employer can only look at your credit history with your permission, but for some employers, if you don’t give permission, you won’t get any further in the interviewing process.

While the majority of employers will not ask to see your credit, in particular fields, asking is routine. A bad credit rating is likely to be more of a factor in certain industries like financial services

Credit scores affect more areas of your life than you may realize.The more responsible you can be financially, the higher you can make your credit score. The higher your credit score, the less you’ll pay in many areas of your life. Have you knowingly been affected in these unexpected ways by a high or low credit score?

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Source: Secondary

What After Credit Score?

Many consumers look at their credit scores and are at a loss for what to do next. Since a credit score is the reduction of your entire credit history to three digits, it’s hard to really see what is happening to get your score to this point. You might see that you have a low score or a high score, but what does that mean for you and your finances? How can you go behind the credit score to get a better idea of what you can do to improve the situation?

The first thing beyond the credit score is a person’s credit report.

Your credit report and clues about your credit score.

It’s the information in your credit report that is used to determine your credit score. Credit scoring models assign numeric values to the information in your credit report and use an algorithm to figure out what your three-digit score will be. But the process isn’t even that straightforward. 

 Each of the credit reports from the different credit reporting agencies is used in the creation of credit scores, and that means that differing information between credit reports can result in different scores. Plus, individual lenders might use their own modifications of scoring models, emphasizing different aspects of your situation, depending on the loan you are getting.

As a result, your first step is to dig into your credit report to make sure the information listed is correct.  If there are any errors, you should dispute them. “potentially material” error about information often used to generate credit scores. 

Once you have your credit report, you can begin looking at information to help you see where you might be weak. Fix errors on your report, identify problem areas, and begin to move forward.

Consumer credit sites and in-depth help with your credit score.

Sometimes, even after you get a copy of your credit report, it’s hard to identify what items are causing you problems, and how each part of your report impacts your credit score. Getting beyond your credit score to see what actions you can take to improve your situation sometimes requires guidance. 

Consumer credit sites make it a point to analyze your score, breaking it down in plain terms for you. If you have a low score, a consumer credit site can tell you exactly why. The explanations of these reason codes can provide you with greater insight into how your score is figured, and help you see exactly which of your behaviors are contributing to a score that might not be quite as high as you would like.

Not only do many consumer credit sites offer you information about the “why” behind your credit score, but many also provide you with concrete steps you can take to improve your credit situation. You can receive helpful strategies for improving your credit score specifically, and improving your finances overall. With helpful insight and guidance in creating an action plan, your credit score becomes more than just a number; it becomes a way for you to confront the realities of your situation and make lasting changes to the way you manage money. This can save you money on all sorts of financial services, from loans to insurance.
                                 

Your credit score gives lenders and others in the financial services industry a way to make snap judgments about you, and the way you are likely to handle credit (and, by extension, your finances). However, this doesn’t mean that you can’t dig into your score and figure out how to improve it so that you put your best foot forward.

Remember that a credit score is dynamic. A bad one can be improved in a short amount of time. A good can be lowered in the same short amount of time.

The right resources, and an understanding of what goes on behind the scenes of your credit score, can help you stay on top of the situation and build a credit reputation that ensures you the best loan rates and other good financial deals.

Source: Secondary

Foreclosure can impact your credit!

You know that a foreclosure on your home can be a big deal when it comes to your credit. But how big of a deal can it be? You might be surprised at how much a foreclosure can impact your credit, and how long it can take to recover, depending on the situation.

Why foreclosure can be so devastating?

Foreclosure can be so devastating because it is related to your payment history. Your payment history is the largest factor affecting your credit score. Before your home goes into foreclosure, there is a good chance that you have missed at least three payments. By the time the foreclosure process is complete, you might have missed even more payments. All of these missed payments are recorded in your credit history and affect your credit score.

The more payments you miss, and the more “important” those accounts are, the bigger the impact on your score. Additionally, reports that your credit can be impacted even more if your credit score is excellent. If your score is 680 and you go through a foreclosure, you could see a drop of 85 to 105 points in your score. A higher score, of 780, could result in a drop of between 140 and 160 points.

Combining foreclosure with another problem, such as a short sale or a bankruptcy on your record, can be even more devastating and result in more difficulty as you attempt to recover your score.
                                 

Improving your credit after a foreclosure

It can take several years to improve your credit after a foreclosure. You might not even be eligible to buy a home for two or three years after the foreclosure is complete. However, you can start working to improve your score.

One of the ways to get started is to have someone with better credit add you as an authorized user to a credit card account. However, for this strategy to be effective, you need to have a close relationship to the other consumer, as a spouse or a child.

You can also start improving your score by getting a secured credit card. You might not be able to qualify for a “regular” credit card right after a foreclosure, so a secured card can help you begin re-establishing your credit. As you make on-time payments, and they are reported to the credit bureaus, you can begin to see improvement. After nine months to a year, you should be able to “upgrade” to an unsecured card that will further help your score.

Other types of small loans, such as a personal loan from your bank or an auto loan, can also help you improve your credit. You need to be prepared to pay higher interest rates, though. As long as your credit is poor, you won’t qualify for the lowest rates. When your score starts to improve, you can take advantage of better offers and lower your interest rates.

Source: Secondary

No Credit Score Can Negatively Impact Your Finances

If you aren’t planning to borrow, it seems like it might be pointless to worry about building up your credit profile. After all, if you don’t have a credit score, it doesn’t matter if you aren’t going to get a loan, right?

The unfortunate truth is that this isn’t always the case. In fact, there are many situations in which your credit score matters more than you think. Even though you might not think it’s fair, having no credit score says something about you to financial service providers and others. The lack of a credit score is an indication to others that they can’t trust your ability to be responsible with your finances.
                                             

Financial Setbacks Due to a Lack of Credit Score

Not having a credit score can actually cost you money. A landlord can charge you a higher security deposit on a rental if you don’t have good credit (and having no credit is often seen as just as bad as — or worse than — a poor credit score). You might also find yourself with less than ideal terms when it comes to signing up for a cell phone plan or getting Internet service.

Additionally, in some states, it’s legal for insurers to check your credit score when determining your premiums. 

When you think about the extra costs of not having a credit score, and how they can add up over time, it becomes clear that you could easily be missing out.

When You Decide to Buy Something Big...

The biggest issue you run into, though, is when you decide to make a major purchase that practically requires that you borrow. You might decide to never get a credit card, or even to pay for your cars with cash. But if you make buying a home a priority, having no credit score means you will have a very hard time qualifying for a mortgage.

No one wants to loan tons of money to an unknown entity with no history of making loan payments (and credit cards count as loans). While you might find some lenders willing to take a chance on you, you will likely have to pay a subprime rate to make it happen.

You don’t have to go into debt to build your credit history. If you get a credit card, use it, and then pay it off every single month, you can get a good credit score without the accompanying debt. You’ll be able to further your finances, and get a house when you’re ready.

Visit: www.cibilconsultants.com
Source: Secondary

Insight of your Credit Report!

Your credit report is one of the first places you need to go to check in on your financial health. Why? Not only is your credit report the place of record that outlines your entire credit history, but this report can provide you important information if something seems “off” on your credit score or if you’ve recently been denied credit.

Yet despite your credit report being so important, it’s a very difficult thing for the average person to read. Your credit report is multiple pages in length, there is a ton of information and numbers to sift through and it’s hard to know what to look for if you are looking for any sort of error or unknown account in your credit history.

                             

Just what exactly is in your credit report and how do you read it? Here is a breakdown of some of the basic information found in your credit report and what each section means:

Report Number and Index: This section is all about navigating your credit report if you view it online or if you need to talk to someone about your report on the phone and you need your report/reference number.

Potentially Negative Items: Your credit report will show you if you have any potentially negative items. These include accounts that are unpaid or accounts that were paid past the due date. Negative items on your credit report may stay there for up to 7 years.

Status and Payment History: Your status and payment history shows if you have any on-time and late payment of your debts or credit items.

Accounts in Good Standing: Accounts that have a positive status and are considered in “good standing” are viewed by creditors as a good thing on your account.

Accounts Types: This tells you the type of loan and whether it is revolving (like a credit card) or an installment loan (like a car loan or student loan).

Soft and Hard Inquiries (Requests for your credit history): Your credit report will show how often someone has checked your credit history, also known as inquiries. A soft inquiry is when someone checks on your credit as a background check; this does not affect your credit score. A hard inquiry is when someone checks on your credit history because they are going to make a lending decision; this does affect your credit score. Hard inquiries can remain on your credit report for up to two years.

Personal Information: Your personal information is an obvious piece but a very important one. This includes things like your name, social security number, address and phone number. If it’s not accurate, your information (and therefore your credit history) could be mixed up with another person’s.

Personal Statement: Did you know that you can add a statement to your report? Sometimes you may want to add a personal statement if you have disputed an item on your credit report and it has not been resolved or to explain the situation behind an account in collections. You can do this by contacting the credit bureau.

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Source: Secondary

Excellent Credit Means?

One of the realities of finances is that many lenders and other financial product and service providers want to know your credit score. Your credit score is essentially a summary of how you handle your money. The higher the score, the better deal you will receive, whether it’s a lower interest rate on a loan or a better quote on your car insurance.

Excellent credit can mean saving tens of lakhs of rupees over your lifetime. In some cases, especially with mortgages, you could potentially save more over the course of 30 years.

What Results in an Excellent Credit Score?

                          

Many consumers don’t think it’s fair that the credit score has become a stand-in for financial responsibility. The argument is that truly good financial habits don’t require you to borrow. For the most part, a credit score only measures how well you have handled your loan obligations. If you don’t borrow, you don’t end up with a credit score. So, unfortunately for some, the first step to building an excellent credit score is to apply for — and obtain — credit, usually in the form of loans.

Once you have loans, your next step is to make all of your payments on time and in full. You don’t need a ton of loans to build up to excellent credit, though. Usually, it’s sufficient to get an installment loan (make the same payment each month to pay off the loan within a set period of time) and a revolving loan (like a credit card). If you are careful to borrow a small amount and make regular payments, you will start building your credit history. It’s important to be careful to incorporate any credit spending into your regular financial plan so that you don’t get in over your head with debt.

There are different credit scoring models, but most have ranges between 350 and 850, or something similar. In many credit scoring models, you need a score of at least 720 to 740 to be thought to have excellent credit. When you have excellent credit, you usually qualify for all the best rates. And, as long as you have enough income to afford your payments, you shouldn’t have trouble qualifying for just about any loan.

If you want to get good deals, from qualifying for a good apartment without paying a large security deposit, to getting the lowest mortgage rate, cultivating excellent credit is a necessity. 
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Source: Secondary

Look for these on your credit report!

You probably already know that you should check your credit report at least once a year. But just why should you care about your credit report in the first place? Well, your credit report is the “snapshot” of your financial health that’s used by lenders, landlords, credit card companies, insurance agencies, cell phone companies and even future employers to judge your creditworthiness. 
Your credit report and your credit score is based on your credit history, and lenders use that to decide your ability to pay your bills or repay your debt.

So your credit history impacts a lot, which is why checking your credit report and making sure it’s accurate is so important. Understanding your credit report – what you owe and to whom – and making sure your report doesn’t have any errors will make sure that you’re as financially healthy as possible.
                     

When you do get your credit report, you’ll want to look through it to make sure that everything is accurate and there is no suspicious activity or accounts you don’t recognize. Here’s what to look for when you look through your credit report:

Information that’s not yours: If you have a common name, your credit history might have some information from someone else’s history. Make sure your name and address are accurate on your report.

Information from an ex-spouse: If you are divorced, your ex’s information may be mixed up with yours.

Accounts you don’t recognize: If there is an account on your credit report that you don’t recognize, it could mean that someone has used your personal identity to open up financial accounts in your name. This is also known as identity theft. Identity theft happens when someone steals your personal information and uses it for financial gain. A person might open a new credit card account or open a new bank account in your name if they someone got access to your full name, birth date and Social Security number. If bad checks are written or bills are not paid from these accounts, it will show up on your credit report.

Out-of-date information: You may have negative marks that are listed after the legal deadline for removing them from your report. Most negative marks can stay on your account for up to 7 years.

Wrong notes for closed accounts: An account that you closed yourself may look like a creditor closed the account. An account closed by a creditor can actually hurt your credit history, so make sure it’s reported correctly.

Non-delinquent accounts still appear as delinquent or more than one delinquent date is listed on your account: Credit reporting agencies may not have noted which delinquencies have been fixed. Similarly, it you have an account that’s in collections, your report might accidentally have more than one date for when your account became delinquent. Make sure there’s only one date listed.

If you do spot an error on your credit report, you have the right to dispute any inaccurate or incomplete information. You’ll need to contact both the credit bureau and the organization or company that provided that information. Both are responsible for correcting inaccurate or incomplete information in your report.

Learn more about identity theft, visit: www.cibilconsultants.com

Source: Secondary