You often hear about car dealerships or various stores gloat that even if you have bad credit they can still offer you financing. It seems like a conflicting statement to want to extend credit to someone who seems less than creditworthy. They are hoping you want to do business with them so they can take advantage of your need for financing and make money. Don’t allow yourself to be in this expensive position.
3 Defining Numbers
A credit score is made up of three simple digits. These numbers tell potential creditors how likely you are to pay your debt. When credit is extended, there’s always an inherent risk that you may default on your obligation. By assigning a credit score, lenders can decide if you’re a risk they’re willing to take. In short, the higher your credit score, the better your credit.
Credit scores are determined by a few key factors, one of which is your payment history. Chances are, if you have a prior payment history of making at least the minimum payment due by the due date, you’re on the right path. Other key factors include how long you’ve had credit and how much outstanding debt you have. If you carry considerable balances, you may consider debt consolidation to free up available credit.
Benefits of Good Credit
You’ve always heard that you want to have good credit, but did you ever stop to think why? The world is run by credit. You have your credit checked every time you want to rent or buy someplace to live, buy a car, apply for most jobs and even establish utilities in your home.
Of course, you could probably get most of the above-mentioned with mediocre credit, but what you have to ask yourself is: at what cost? If your mortgage or rental application is approved, chances are you’ll have a higher interest rate or bigger required deposit. Whereas that may not sound like a big deal, it costs you more money needlessly. If given the choice, it’s pretty unlikely you’d choose to pay higher rates.
The bottom line is a lower credit rating will lower your chances of getting the credit you seek. If you are granted credit, it will be at a higher interest rate, which only costs you more money in the long run. Instead of taking what you can get, take steps to improve your credit.
If you’ve had a rocky start with how you’ve used credit, not all hope is lost. There are ways to improve your credit score and turn around your creditworthiness. If you’ve been less than prompt with paying your monthly obligations, being sure to pay at least the minimum amount due by the due date, is a sure-fire way to be on your way to improving your credit. Another helpful tip is to make several smaller payments throughout the month. Making smaller payments slowly increases your available credit.
The professionals at Hawkeye Associates can also help you improve your credit score by giving you a debt consolidation loan that will allow you to eliminate your credit card debt, and pay off the loan with one easy monthly bill.
Your debt to income ratio is another thing to keep in mind because it can negatively impact your score. If possible, consider asking for an increase in your credit line to give you more of a cushion with your credit availability versus utilization.
Examine the information within your credit report. If you find any errors, be sure to report/correct them as soon as possible. Having erroneous information can also adversely impact your credit.
Don’t close accounts just because you pay the balances off. By maintaining a decent available credit, it shows you can have credit without using it all, which works in your favor.
Good credit does require a bit of work and know-how on your part, but once you understand what good credit entails, you will be well on your way to getting the credit score that works in your best interest.