Credit rating or credit report is a way through which your credit worthiness is evaluated by a debtor, especially a business and/or a government.
Through credit rating, your credit worthiness is analysed and evaluated and it is usually carried out to determine your ability to pay back a debt and the likelihood of default.
Your credit rating doesn’t just dictate what products you’ll receive, but also how good the ones you actually get are.
For example, most loan rates are ‘representative’, meaning the APR depends on your credit score; with credit cards, if your score’s too low for the sexy deal you wanted, you might get accepted but sent a different product.
Why credit rating is important
In this global economy downturn, not many people can boast of a great or good credit rating because of one reason or the other. But it’s always good to try to keep a clean sheet when it comes to your credit history because it may affect you in future.
Nowadays, people have become increasingly dependent on credit. This is why it is very important that you understand the importance of personal credit reports and credit rating or score as well as what it does.
To simply put it, when you use credit, you are borrowing money with a clause that you will pay back within a specified period of time.
Tips on how you can boost your credit rating
So when you apply for a credit card, loan, mortgage, contract mobile phone or even monthly car insurance, your credit rating will be checked to determine the likelihood of you paying back the money you borrowing or services you are signing up to.
Depending on your credit score, lenders will determine what risk you pose to them. So just because one company rejects you, it doesn’t automatically mean another will.
#1). Never let debts pile up
Another very important thing to always remember is that the more your debts pile up, the worst it affects your credit rating. It is imperative to always pay your existing credit card bills and loan repayments on time.
What this does is that it shows potential lenders that you are in control of your finance and more likely to meet future repayments. You should also try to pay off any outstanding credit accounts completely if you have the means.
#2). Know your credit report
An accurate reflection of your circumstances is what your credit report should be. Therefore, it’s very important that you know what your credit report is and whether it reflects the true you.
Your credit report is a personal record of your loans mortgages and your credit cards repayment history and other information such as whether you have any court judgements against you. Always make sure that you are up to date!
#3). Update your record / set the record straight
Updating your credit record is very important most especially if anything on your credit report needs to be updated or corrected, you need to set the record straight.
In other word, it’s your responsibility to ensure that information or data held about you is accurate and correct. You have the right to challenge entries you think are wrong in your credit record.
#4). Limit your number of credit applications
The more your credit rating is checked or looked at, the worst it affects your credit rating. When your credit rating is checked, it is recorded in your credit reports and it is sometimes viewed as a bad thing.
The more credit applications you make, the likely your credit rating will be checked by the lenders and this is not usually good for a healthy credit report.
#5). Always call a spade a spade – tell the truth
It is important that you always tell the truth about yourself and never attempt to lie on an application form. Lenders will find out and any “inaccuracies” on an application could be classed as fraud and as such will tell against you and cause difficulties in future applications for credit.
#6). Identity security and protection
Identity fraud is one of the fastest-growing crimes in the country because nowadays, it is much easier for the identity fraudster to operate and steal your identity and use it in a fraudulent way.
Therefore, it’s your responsibility to make sure that you are monitoring your credit and financial record. If you notice something unusual on your credit report such as a loan application you did not make, you are required to alert the necessary agency because you could be a victim of identity fraud.
#7). Avoid carelessness – don’t leave footprints
If you’re shopping around for credit ask potential lenders for a quotation before they search your credit record. Lenders may view a flurry of credit application searches as suggesting that you are desperate for money over-extended or even that identity fraud is taking place.