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The Importance of a Good Credit Rating A good credit rating is more than just an obscure number that will guarantee you credit when you need it. These days, creditors arent the only folks taking a gander at credit scores. Insurers, apartment managers, and even employers are referring to a persons credit score to help them decide if they will offer premium insurance services, approve a new lease, and offer employment.
Like it or not, a credit history paints a pretty vivid picture of what sort of person you are. More than simply stating how much you owe on current credit lines, a credit report also delves into the past to predict how payments will be in the future. A person who has always paid every single bill on time is a great credit risk; and is likely to continue to stay on top of payments unless otherwise sidetracked by a
job loss or perhaps a medical problem. Conversely, a person whose credit report shows a total disregard for paying bills on any sort of schedule is likely to continue this sort of trend, and will probably not be offered lower interest rates because of this history. People reading a credit report generally do not have the luxury of knowing a customer on any sort of personal level, and therefore they can only rely on the picture painted by the credit report.
So why maintain a good credit rating? First and foremost, a good credit rating is a product of someone who pays their bills on time and does not overextend their finances. These two tendencies are great practice to begin with, and although it is nice to have a good credit rating it is even nicer to be squared away financially. A good credit rating is a perk of a financially healthy lifestyle.
Consumers with good credit ratings will be offered the best interest rates by credit card issuers, and will also have more buying power when it comes to finding the best card to suit their needs. Many of the premium rewards cards are available only to consumers with excellent credit. With regards to utilities and home or apartment rentals, people with good credit ratings will often be required to make lower initial deposits or may be able to skip deposits all together since their credit score indicates they are consistently on time with payments. Some insurance companies extend better car, home, and life insurance rates to folks with high credit scores, although this practice is controversial. Many consumers are up in arms over insurers even wanting to know personal credit history.
There are several factors that contribute to credit scores. Information on a credit report is compiled and a corresponding score is declared depending upon timeliness of payments, number of open credit accounts, length of time with creditors, and amount of available credit in relation to balances. Other factors, such as numbers of inquiries on the credit report have a small impact, but do in fact affect the score to a certain degree.
It is possible to add a comment to the end of your credit report; if you feel as though your credit report is not an accurate depiction of your financial reliability you can contact the three credit bureaus and request a sentence or two of your own wording be added to the report. This way if all the late payments are due to an illness, or maybe a wayward spouse, you can explain it to whoever is reading the report. It is important to note, however, that the majority of creditors utilize computerized scoring, so it is unlikely that the explanations added might ever get read. Other creditors may take the time to read the comments but may not really care why the bills were late, just that they were indeed late.
The trick to achieving a good credit rating is to consistently pay your bills on time, and to not wrack up a bunch of bills. The benefits of a high credit score are numerous, and will probably save big bucks in the long run in the form of lower interest rates and better rewards cards. Even folks with lower credit scores can build up to a high one; it just takes time and tenacity.
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