There are many misconceptions about credit scores out there.
There are borrowers who believe that they don't have a credit
score. There are others who think that their credit scores
don't really matter. These sorts of misconceptions can hurt
your chances of gaining employment, obtaining preferred
interest rates, and even your chances of qualifying for renting
an apartment.
The truth is, of you have a bank account and you pay utility
bills, then you have a credit score, and it matters more than
you might think. Your credit score can be called many things
such as a credit risk rating, a FICO score, a credit rating, a
FICO rating, or a credit risk score. All these terms refer to
the same thing: the three-digit number that lets lenders get an
idea of how likely you are to repay your bills.
Every time you apply for credit, apply for a job, or even apply
to some apartment complexes, your credit score is checked.
Another misconception is that employers check your credit only
if you apply for a job that involves handling money. The fact
is that many companies use credit checking as part of their
standard background checks.
Make no mistake, your credit report can be checked by anyone
with a legitimate business need to do so. Your credit score is
calculated based on complex formulas. Things such as your past
financial responsibilities, past payment records, credit
limits, credit line utilization, open and closed accounts, and
public records are all considered. It provides potential
lenders with a quick snapshot of your current financial state
and past repayment habits.
In other words, your credit score lets lenders know quickly how
much of a credit risk you are. Based on this credit score,
lenders decide whether to trust you financially. They use this
information to approve or decline a loan. Even if approved,
your credit score can have a direct effect on the interest
rates you pay. Apartment managers can use your credit score to
decide whether you can be trusted to pay your rent on time.
Employers can use your credit score to decide, perhaps
unfairly, how you manage your life. Some employers find that if
you're poor with money, you have poor organization skills and no
attention to detail -- things that are a must in a corporate
environment.
The problem with credit scores is that there is quite a bit of
misinformation circulated about, especially through some less
than scrupulous companies who claim they can help you with your
credit report and credit score -- for a fee, of course.
From advertisements and suspect claims, customers sometimes
come away with the idea that in order to boost their credit
score, they have to pay money to a company or leave credit
repair in the hands of so-called "experts." Nothing could be
further from the truth. It is perfectly possible to pay down
debts and boost your credit on your own, with no expensive help
whatsoever. There are many free resources on the web that will
enable you to do just that.
About The Author: Lee has done it all in the lending business.
From loan origination to processing to underwriting, even
owning a mortgage company. In
http://www.credit-restoration-kit.com, he exploits the secrets
of the industry to help fix credit, obtain mortgages, and
improve financial standing. Free articles, resources, and a
blog.
