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Most lenders decide how they do business with prospective borrowers by their credit score. It provides lenders with a picture of the borrower’s ability to pay the debt back and how much they can manage to borrow without getting in over their head.

Credit scores are based on several factors: timely payment of bills, stable employment, lengths of time at present and previous addresses, stable bank account, registered voter status, and connection to those who are poor credit risks. A lender will charge a rate that is commensurate with the risk you pose. While lenders of certain fast cash loans online and similar loan products are willing to forgo a credit check so long as the borrower meets other criteria, a poor credit score can be responsible for outright rejection, a lesser limit, or a greater rate of interest.

The primary elements used to determine if you qualify for a mortgage, car loan, or another type of loan are your credit score along with other data on your credit report. Do not confuse the two. The credit score is only one cog in the wheel of the credit report. It also provides the amount of indebtedness you have already, credit history, income, aggregated assets, and the amount in savings accounts. All of that information is used to calculate your credit score. Keep in mind, also, that your score may differ among the three reporting organizations – Experian, TransUnion, and Equifax. If you are applying for a mortgage, lenders will likely use the median score to determine the interest rate they will offer you.

Whenever a lender wants to check your credit score, ask him or her to do a quotation search, which means that it will not be counted against your credit. If numerous lenders check your credit, it may appear that you are not creditworthy, and your score may go down. This is especially true when you are not ready to submit an application but are simply checking around to ascertain rates and your ability to purchase.

Continuing to maintain a good score is important even if you are not in the market to make a loan. In some cases, a lender will increase the interest rate if, during a regular review of your credit, your risk factor has changed. Although you may have secured interest rates based on very good credit, your risk assessment has changed over time, and your rate may be increased. Regardless of how unfair this may seem, it is perfectly legal.

Not only does your credit score affect your capability to borrow, but your income provides lenders with your ability to make monthly payments on a new loan in addition to all of your other financial responsibilities. Other areas of your life that are affected by your credit score are matters of car insurance premiums, renting an apartment or a house, refinancing, and job procurement. It conveys the amount of trust they have in you as well as how accountable you are with your finances.

How credit affects borrowing matters. Low scores may be indicative of high risk, which usually translate into higher interest rates. This is true even if you have no credit because lenders will have nothing with which to gauge your success or failure for caring about your good name. While credit cards can be risky for someone with no self- control, having one which you pay off regularly or make more than the minimum payment can help improve credit scores since it shows responsibility and interest in maintaining a desirable credit report. Even if you are not in the market to secure credit for any reason, stay on top of your credit. You never want to neglect it.

Steve Campbell

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