What is a good credit rating, and what are some of the things that affect it? First of all, the “real” definition of “good” has somewhat changed over the years. For starters, lenders now tend to use a three-digit number, instead of the older two-digit number system. While it may sound odd, many consumers have actually had their scores reduced because they thought they were being charged an impossible amount for their borrowing. These days, most lenders are aware of this and so will usually honor a lower score.
Credit scores nowadays are also influenced by a few other factors. One of them is the lowering of the real estate market. Many lenders have been reducing their home loans in recent years, due to the poor economy, and while some may be lucky enough to avoid significant decreases in their borrowing, others may find their rates dropping. As with the overall economy, these lower interest rates are generally welcomed, as they reduce the burden on borrowers.
Another important factor affecting credit scores nowadays is the increase of online lending. Lenders are now reporting to credit agencies the number of applications they receive via the Internet. While it may seem like bad news for some lenders who’ve had trouble getting people to apply to their loans, this change is actually good news for consumers. Because lenders can see how many applications they have received online, they know that they can still get many people to apply and so will keep their rates lower than they otherwise would.
A final factor that has a direct effect on your score is your payment history. Your payment history will be used to help determine your FICO score, and it is a good idea to make sure that your payment history is strong. Paying bills on time is an excellent way to show creditors that you are managing your money responsibly, and that you will be able to pay off all of your debts if you should ever find yourself in debt. If your payment history is spotty or if you skip payments, this could hurt your overall score. Therefore, it is important to make sure that your payment history is near perfect.
Although bad credit scores used to be a problem that could not be improved, these days the situation is different. There are numerous lending programs available, and some of them actually specialize in helping people with poor credit scores to get a loan. Lenders now consider the number of days the person has lived in their home, the amount of money that they have saved for emergencies, and other factors when deciding how much to lend. Because of this, many lenders now offer special loan products for those with poor scores. These products typically have interest rates that are significantly lower than what people with better credit stands.
In addition to getting approved for more expensive loans, getting approved for a mortgage can sometimes be difficult for those with poor credit scores. When trying to get approved, lenders will often run credit reports to determine whether or not you will be a good risk. If your credit reports show collections or late payments, lenders may decline your application. However, if you do have good records on your credit reports, you can greatly improve your chance of getting approved for a mortgage by paying down any debt that you currently have and making sure to always pay the entire balance before your loan term is completed.
