Credit Score – How It Affects Your Financial Life?

Credit score is the score that describes the financial status of a person. It is determined based on various factors such as the loan type that they have taken so far, and the money that they have cleared on such loans.

If you have taken loan and have cleared it within the limited time duration, then you will not have a bad score. However, if you have not cleared the loan yet and still have applied for loans from multiple sources, then there is no doubt that your credit score will be quite low.

Every time you apply for loan in any financial institution, the first thing that such institutions consider is your credit score. If you have good numbers as your score, then it is like a guarantor that assures such associations that you are trustworthy and will return the amount as early as possible.

How the Money Lenders decide whether to let you Borrow the Amount

Credit card companies and banks and other such financial institutions conduct thorough investigation before deciding whether to approve your loan application or not. They give extra importance to some factors such as,

  • The information that you have provided in the application form
  • The final report of your credit, which includes reference from three different sources such as CallCredit, Experian and Equifax.
  • Your history of loan applications. This includes the overall amount that you have borrowed and have successfully returned. The information is obtained from the money lenders, from whom you have borrowed money before.

Effect of Poor Credit Score

If your credit score is comparatively lower, then it will affect your financial status in a negative way.

  • You will be charged with higher rate of interest, every time you borrow amount from any source.
  • Sometimes you’re application might even get rejected because of poor credit score.

Improving Your Credit Score

There are many ways that can help you find answer to the commonly asked question, “how to improve your credit score”. There are many websites that will help you in this matter. You can take help from such websites and understand the right way of increasing your credit score or can click here. Some commonly available tips to increase your credit score are listed below.

  • Make sure to clear all your bills on time. The bills need not be the bigger ones such as electricity bill of your company, telephone charges, etc. Clearing some smaller amount bills such as house utility charges, telephone and water expenses, etc, will also affect your credit score.
  • Make sure to not use your credit card, if you have reached the limit. If you have understood that the overall credit bill has reached the maximum level (the amount in your current bank balance), then it is time to stop using credit card till your account is refilled with salary amount.
  • Instead of borrowing amount from different sources, make sure to clear the pending loans as early as possible. Clearing every amount that you have borrowed within limited time duration can increase your credit score. You can either take help from your family members or friends, or can sell some of the furniture or jewelry that you do not use anymore.

Author: Richard Casteel

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Richard is the chief author of this blog. He worked as a financial advisor in money market form last 10 yrs. His financial sense in Share trading and any other trading is just outstanding. He just shares his knowledge and experience through this blog. You can contact him directly though

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