Many factors affect approval of loan applications and a Credit Score is one of them. Credit score is defined as statistically derived numeric expression of a person’s creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts. A credit score is based on, among other things, a person’s past credit history. It is a number between 300 and 850 - the higher the number, the more creditworthy the person is deemed to be. – Investopedia
But uses of credit score goes beyond loan approvals. It could also affect insurance rates and even employment opportunities. A credit score can affect in determining ones premium whether it is for insuring a vehicle or purchasing a home insurance. Insurers establish a so-called insurance score which is significantly based on credit score although with a few difference. An undesirable credit rating will set one back a lot of money in extra premiums every year while a favorable credit score can in fact make one eligible for a discount. Employers also check an applicant’s credit rating. This happens especially those who are in the financial industry like banks. This creates a little controversy because employers see it as a sign how responsible an individual is. Naturally, some situations or circumstances can be out of ones control and yet affects his credit history.
Some ways on improving credit standing and avoiding low credit rating:
Pay above the minimum. When possible, make payments above the minimum due. Aside from the amount of payment creditors also look at how long does it take for an individual to payoff a debt.
Device an alternative. In case a person is having problems in updating or settling his financial obligations, it is better to discuss with the lender and open an alternative or plan that works both of them. Negotiating is better for the lenders than hiring collection agents and the like.
Use debit instead of a credit card. Unlike credit card, debit cards only allow one to spend what he actually has. They don’t have bills and not charge interests.
But above all these, the most important thing is discipline. One should have that discipline and be responsible with his expenditures so as not to affect his credit score. And maintaining the creditworthiness will assure one of a loan or employment when he needs it.