Credit rating check
Taking loans, credit cards and having medical bills to pay is the order of the day. There would be no single person who does not have credit in any one of these. The way these loans are repaid has an effect on the credit score of the individual.
Three agencies maintain a record of the credit rating check. They are Equifax, Experian and Tears Union. Rating agencies supply the credit rating to the companies that require the credit scores.
Credit rating check involves all the debts that you have taken in the past and the current debts. The history traces back to almost 10 years. There is a special note of any missed or deferred payment. Borrowing before paying back is also considered as a high-risk. Over limit in credit cars is a high-risk component.
Not only is the individuals credit rating check taken into consideration, even the credit reports of anyone who lives with the borrower and their bad credit histories can have an effect on the individuals credit rating check.
Let us now understand how credit rating check is done. FICO or Fair Isaac Corporation is the most common method used to do the rating.
The credit rating check is prioritized according to:
1. paid previous debts2. present debts
3. credit history
4. types of debts used
5. Number of times credit rating has been checked.
Decline for credit card or any other type of loan means that the borrower does not have a good credit rating. Normally companies, which lend, look at credit rating check instead of doing a thorough check on the income or other sources. And a bad score would mean a higher interest rate.
Credit Rating agencies withhold the information from the customers and the scores can be obtained from the credit rating agency by writing a letter and paying a small fee. Companies are required to send the full credit report to the individual. Any error in the report can be notified to the credit rating agency. In some countries, credit reports are available frequently for a fee or free of cost.
The credit report may look very confusing as there is a list of numbers each with a different meaning. Some factors are taken into account when they create the credit rating check, which are history of past payment, outstanding debts and length of credit history.
Credit rating check is also affected by a lot of debts, no credit history or credit applications made in the near past. Even higher interest rate credit cards will lower the credit score of an individual.
A credit score of 700 is considered very good. Any number between 450 and 600 is considered as moderate risk. The customer will have to pay high interest rate. Sometimes a collateral security may be required to pay the loans. A credit score of less than 450 would not qualify for credit cards or loans.
There are ways to improve ones credit score. There are credit-counseling services that provide help for no cost. They assess the individuals situation and offer advice to improve the score.
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