Credit Rating

Credit rating can affect whether you get a loan or not.

Credit ratings can affect whether or not you get a loan, a credit card, an apartment, or even a job. They affect the amount of money you can borrow, how much time you have to pay it back, and how much interest you will pay. You insurance rates may be partially based on your credit rating.

A credit score is a number between 300 and 850 that tells the inquiring party how well you pay back your debts. Higher scores are better. Three major credit bureaus, Equifax, Experian, and Trans-Union, collect your financial data and create your score based on their own criteria. Since the three credit ratings, or FICO scores, may differ, sometimes they are averaged into a composite score.

Many sources of your financial data do not report your information, or report limited or inaccurate information. Some companies like Capital One consider a client's credit limit private information, but by not reporting this detail to the credit bureaus, they may cause a person's credit rating to be artificially lowered. Some smaller financial institutions only report late payments and overdrafts, which is harmful to those with responsible histories. Ask your lenders, your landlord, your insurance company, and any other potential credit reporting source about their reporting policies.

To improve your credit ratings, pay your debts down. It's best to decrease open balances in relation to available credit. Closing a seldom-used credit card account may actually hurt your ratings because you are suddenly borrowing a greater percentage of your available credit. Don't apply for more credit unless you need it.

Too many credit card credit checks will reduce your credit rating. Seek credit counseling, if necessary. It will not hurt your credit ratings, although the occasional lender may be concerned. Always pay on time. This establishes excellent repayment history.

Request a free copy of your credit ratings from http://www.annualcreditreport.com or 1-877-322-8228. Report any inaccuracies to the reporting sources as well as the credit bureaus. Sometimes there is merely a clerical error, and sometimes you might be able to resolve a lingering financial issue.