In the past decade and a half the Western economies have become more hooked on the need for credit to survive. Nowadays, the vast majority of people need credit to purchase their necessities such as food, travel and accommodation. As more people become more dependent on their need for credit cards and loans many cannot survive without it. When the economy was in good shape many people found it quite easy to acquire a loan or credit even it they where in debt. However, since the economic downturn it has become increasingly difficult to acquire loans as banks tighten their lending requirements.
To determine a persons credit score banks use a number of ranking systems such as the FICO scoring system. This system uses a credit score scale range between 300 and 850. Any credit score that is below 579 is considered a poor credit score and this means the banks will see this person as a higher risk. The banks see a person with a low score as someone who has a poor record in paying their debts therefore, they will be given less preference when it comes to being offered the best loans and cheapest interest rates.
In the past a credit score of 620 would have been considered a good score however, since the economic downturn the stakes have been raised and a 720 which would have been considered an excellent credit score in the past will not be good enough to get you the best deals in today’s economy. Even if you find that your score has dropped or remained the same on the credit score rating scale the difference of just 50 or 75 points can cost you a lot of money over the long term with a house loan for example. That is why it is very important that you check your credit score if you are planning to apply for any banks loans in the near future.
If you find that you have a low credit score then, there are ways that you can increase it. There are many variables that can lower your score and these can include having too much debt, late payments, bankruptcy, a high debt to credit ratio to name just a few. To help raise your score you should acquire the habit of setting a budget and clearing all your outstanding debts and paying your expenses on time. This can easily be achieved by setting up a direct debt facility with your bank to ensure a monthly transfer goes out to cover your monthly expenses on time. You can also request a copy of your free credit report and check the financial details to see if there are any mistakes or entries that are out of date. For instance, entries that are out of date or details that are incorrect could be lowering your score and should be reported to the credit bureau for removal.
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