By Tim H Lambert

Applying for a new credit or loan is not as easy as you think. Creditors and lenders will first look at the most important basis of your application, the three digit credit score. Fico invented the credit score and the three credit bureaus (Equifax, Experian and TransUnion) used this scoring system. The mechanism of scoring is very complex and you should think like a computer if you want to guess your score. Credit report and history can influence your score. You can be an excellent credit (having a score of 730 above), above average credit (700-729), good credit (670-699), fair credit (585-669) and poor credit (584 below).

If you are in the poor credit range, you may suffer the following consequences of bad credit: aside from rejection in your loan application, you may get a loan with a very high interest rate. Remember, higher score gets lower interest rate. A 100 points difference in score can give you a triple interest for a particular loan. Creditors and lenders might charge you additional fees to get you to focus on their specific responsibility and to recompense the creditor for taking the risk. Examples of such fees are over-the-limit fees, late fees, legal fees, repossession fees. Penalties, default rates, and deficiency payments. These fees covered both secured and unsecured debts. You can get sub-prime loans that are offered to high-risk borrowers with an interest rate higher than the prime interest. Therefore, to avoid these consequences, you should ask help. Seek professional advice on how do you improve your credit score.

You can start by creating a new and improve credit history. This means that you must change your way to create a better credit score. Start by paying all your bills on time and do it every time. Delinquent payment is the main cause of credit score drop. Never ever delay your payment and if you miss a payment or two, you must take proper actions to pay for it. You should spend only what can you afford, and try no to use more than 30% of your credit cards’ limit. Pay off your debts and do not revolve them. If you have many credit cards and you want to close some of it, try to do that one card in every two months; on the other hand, do not open new accounts frequently. It may cause danger in your score. Therefore, you had better slow things down. You should shop for loan having better interest rate, however, never take too long to shop. Always check the status of your credit score. Also, if you are in a repair mode, check your credit report for inaccurate items. If your report has derogatory items, exercise your right to dispute them. Inaccurate items can hurt your score and disputing it can increase your score.

Having credit is nice like having many credit cards and unsecured loans, but you must take note that it is your responsibility to pay for them on time. Remember, financial constitutions consider people with no credit a bigger risk than the people with credits especially if that person pays on time.

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