Establishing Credit History
Credit history is becoming extremely important in today’s society. When a
lender makes the decision to extend a loan; the absence of credit history can
reveal as much in regards to a person as having too much credit. In order to
obtain and maintain wealth, credit history is instrumental.
When you go to buy or purchase a home, car, or anything that requires
additional money, a lender will determine financially if you are able to pay off
the loans based upon your track record of paying off debts. If you have bad
credit, or a history of not paying back loans, lenders may deny you credit. In
addition, if you do not have a credit history you may be declined by lenders as
well. Lenders may also be unwilling to assume the risk of financing your loan if
you have never owned a credit card.
If you are just beginning to establish credit or have a bad credit history,
you may be forced into a higher cost loan. This is why it is critical for you as
a borrower to read the fine print on any loan agreement. The most important
thing to remember is by taking out a loan and not repaying the loan has agreed,
can damage your credit worthiness for the future.
Review the following for some tips on how to help wisely manage your credit:
Credit Report and Credit Scores
In order to assess your credit scores, lenders will review your credit report
which provides a history of your borrowing. Included in a credit report is your
name, address, social security number, credit card payment history, public
records information (liens, court judgments for monies owed and any other
outstanding loans). Most lenders access your credit report from the credit
bureau and utilize this report to make a lending decision.
The likelihood that you as a lender will repay the loan is determined by
reviewing your credit score. The score is based on your credit history, which
includes; credit history and history of on-time payments. Remember that fair
lending laws prohibit credit-scoring models to report information such as race,
gender, or age.
FICO Scores are referred to as Fair Isaac and Co.; the leader in the credit
scoring method. High FICO scores will most likely ensure you get loan approval.
These scores have now been made available to the public, for a nominal fee in
most cases. Review the list below on how to obtain your FICO Score.
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Shopping for and Managing Credit
Ensure you make smart decisions when you first obtain a credit card or loan.
This is one of the most important things to review carefully in order to avoid
the credit pitfall. Shop around to get the best interest rate and the credit
cards with low or no annual fees. Always try and pay more than the minimum
amount due on your credit cards, and if possible pay them in full monthly. If
you know you cannot afford to pay the loan back; don’t accept a credit card just
because you are approved. Do not "max out" credit cards! This reflects poorly on
your credit and you may have trouble paying the money back.
If you are experiencing financial troubles, discuss this with your creditors
and a legitimate credit-counseling firm. If you have a co-signer or are a
co-signer on someone else’s account their credit history and yours is mutually
important.
Rights and Responsibilities as a Credit User
Rights and responsibilities accompany credit and credit is an extended
privilege. Review the following to help make the most of your credit:
Read and Understand the Fine Print
If you enter a credit card agreement with a spouse or significant other, you
are held responsible for whatever debt is incurred on the credit card. Ensure
that the issuer actively reports to a credit agency; if not, your payment
history is not reflected in your credit report.
Studies have revealed that credit reports often contain errors; you have the
right to dispute erroneous information. As a consumer, it becomes your
responsibility to dispute inaccurate information contained in your credit
report.
When applying for a loan, a lender can request a fee for obtaining a copy of
your credit report. The charge; in most cases, will not exceed $15. Examine all
fees being charged and if the costs are excessive, question them.
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