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What is a credit score? What is the importance of credit score while taking loans
The credit score is a number derived with the help of certain criteria. These criteria describe your behavior as a credit user. A disciplined behavior as a credit user will get you better credit score, while carelessness on this account will damage your score. There are some major criteria that affect the credit score:
Payments of debts – Making the payments of debts in full and on time will enhance your credit score. These debts may be loans or credit card balance payments.
Credit accounts – The number and types of accounts that you have also affects the credit score. The balances in these accounts will also have a major impact.
Credit history length – A lengthier credit history is better for your credit score. This is the reason that youngsters are advised to start using credit facilities like credit cards when they start earning.
Debt to income ratio – The amount of your income that goes into repayment of debts has an impact on your credit scores and the lower this amount the better.
Credit profile – Your credit activity will be recorded by the credit bureaus and this will impact your credit score. Bank or retail store default listings remain on the record for two years. Any judgments against your name stay on the record for five years.
It is important to maintain a good credit score for a number of reasons. The main reason is of course that a good credit score will ensure that you are able to get loans and other type of credit from the traditional money lending institutions when you require. On the other hand, a poor credit score will end up getting your loan applications to be rejected. This is because money lending organisations look at people with poor credit scores as high risk options. A poor credit score means that a person is not very good at managing his or her finances and is more likely to default on the loan repayments.
There are other repercussions of a poor credit score, as well. Nowadays good employers also check the credit history of a candidate before hiring him or her. A good credit score will hence increase your chances of getting a good job. On the other hand, if you have a poor credit score then employers will look askance at your profile and be hesitant to offer you a good job. Even home owners look at the credit history of a prospective tenant before giving their home on rent. A good credit score will ensure that you get a rented home in a good area.
About the Author:
Profitech Credit Solutions provide instant loans information services to people, nationwide in South Africa. One can stabilize their financial future by making calculated decisions. They offer competitive interest rates for instant loans in SA. Their information and advice on getting an instant loan in South Africa is updated on a daily basis. Read through their useful tips & practical advice on getting a loan. They provide financial tips, news, and a business directory for lenders.