Eye-Opening Facts About Credit And Credit Scores You Must Know

If you have been handling your finances for some time, credit and credit scores are not unknown to you. Their significance in your financial life is immense and you cannot deny it. They are critical determinants of your financial future.

You should be aware that your credit history is more than your payment history. Your credit score can provide you with information about a lot of things regarding your financial behaviour. These scores are a combination of diverse accounts you hold, your age and the total balances you hold.

Besides, credit and credit options might vary depending a lot on your financial situation. The more you explore it the more you can do the essentials to make your financial life healthy. Without knowing the status of your credit scores, many lenders will not get ready to process your application.

On the flip side, it is not the only decisive factor. Otherwise, it will not be possible for you to get loans for people with very bad credit scores. Thus, the extent of its weightage while exploring financial opportunities is not a constant thing.

According to some lenders, credit scores are one of the significant determinants of interest rates. In totality, credit scores are something that plays a crucial role in handling finances. Educate yourself about the different facts of credit and credit scores with the help of this blog.

Demystifying facts about credit and credit scores

This topic might seem difficult to reflect on. However, you should not remain indifferent to the factors that influence your financial well-being. You might find them as trivial things to pay attention but they can impact your finances significantly.

The result of being ignorant of what is happening to your credit scores can be dangerous. You will be in a tricky financial spot because of very poor credit scores. Rectifying this situation is highly impossible as getting loans for really bad credit is difficult.

Thus, you might know how to process the scattered information about credit and credit scores. You can take the help of the below points.

1. Good credit cannot assure 100% acceptance

You must know that credit score is one of the significant parameters controlling lending decisions. However, having perfect scores cannot guarantee that you will get approval for the loan. In the case of loans, other factors are there to influence the lender’s decision.

At the time of processing your loan request, the loan provider will focus on various matters. Only when you can fulfil all the lending requirements, you can expect assured acceptance from the lender.

2.  Having different credit scores at the same time

Yes, you can have different scores as there are different credit scoring companies. The main reason behind having different scores is that they use different scoring models. However, the disparity will not be significant as the scale of the range is almost the same for these scoring companies.

Take note of the probable variations by focussing on the integral factors. It will not be very tough as they have the common range to work with.

3.  You can report items on your credit report

You must review your credit history from time to time. It will keep you updated about what is going on in your credit reports. It will also inform you about errors in the credit records.

Do not think that nothing can be done once you spot any mistake in the credit reports. You have every right to report the mistake. After that, necessary actions will take place.

If you do not put in effort to contact the lender or the credit bureaus, you cannot dispute incorrect items on your credit reports. Different types of errors might occur in your credit report for a payment that you are not accountable to pay. It could happen as an identity issues because of sharing the same name on different platforms.

4.  Bad credit should not necessarily cost you more

The meaning of having poor scores is not that you have to bear the burden of heavy fees. There are bases which decide whether or not the lender will levy high rates. Some lenders might consider credit scores as a decisive factor for loan rates.

On the other hand, there are direct lenders who do not increase the rates unnecessarily. They keep the rates practical so that poor creditors can afford loan payments. However, it is advisable to take steps for credit improvement so that you can explore feasible opportunities.

5.  Old credit cards can be kept open

There is no harm in keeping the old credit accounts open. You do not have to worry if you are keeping up with payments. If you are maintaining these accounts responsibly, you can take advantage of them to build or improve credit scores.

For this reason, it would be better for you to have a credit card with a low or no balance. It will be helpful in building your credit scores. It will also be beneficial for the betterment of your credit utilization ratio.

Think twice before suddenly closing any account which has a positive past record. In worst cases, it can negatively impact your credit scores.

6. Credit reports and credit scores are different

Oftentimes, people get confused between credit reports and credit scores. Both of them sound similar but have a different meaning. A credit report is a document that has recorded information about your credit history.

It takes note when you seek help from external funding. This report is created by prominent credit bureaus. On the flip side, credit scores are what your credit report reflects.

They are basically a part of your credit history. Thus, these are two different aspects.

7. Bank account balance cannot impact credit scores

It does not matter the amount of balance you carry in your bank account. It could be big or small but it would have no impact on your credit scores. It cannot influence the credit score directly.

Overdrafts are associated with your bank account. Its usage can have an impact on your credit scores. You should use it responsibly to take pleasure in good credit.

The bottom line

Although credit and credit scores are a common topic, you might miss out on some important deets as mentioned in this blog.

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