How Personal Loans Can Boost Your Credit Score

A credit score is basically expressing any person’s financial strength numerically. This score states the creditworthiness of a person and is based on credit report information assessed through credit bureaus.The credit score is of great use for lenders like banks and credit card companies as they use this score to evaluate the risk they may be involving themselves in by lending money to future customers and thus protecting the Best Lending Company from incurring any bad debts. This score is used by the lenders to determine the rate of interest to be charged and also to determine the credit limits.

Usage of credit score is not just limited to the banking sector, infact other organizations such as the mobile network operators, insurance companies, employers, landlords and even government departments use the same technique before entering into any kind of contract with a consumer.

Today, having a good credit score is very important because the society at large is dependent on credit for so many things – whether it is buying a house or a car or even for an education loan, everything depends on the credit score. A good credit score actually enable an individual to acquire a Loan At Low Interest. Hence, these scores directly affect the rate of interest which a person pays after applying for a loan.

The question which is so often asked is how can a simple number determine whether an individual can buy a car or a computer? If the credit reports are read properly it will be observed that they contain a history of everything that concerns money transaction in an individual’s life – right from the punctuality of payment of bills to the default in paying parking tickets everything is recorded. Using this three digit number the lenders predict the punctuality with which they expect the borrower to repay their loan and accordingly charge the rate of interest to protect themselves against any losses arising in future. Until recently, such scores were available for review only to the lenders; the consumer was not allowed to access it. But, this scenario changed in 2001 under pressure from various industry and consumer groups and now anyone desiring to view their credit score can do so by paying a fee to the credit reporting and Credit Monitoring Agencies.

To understand your credit score it is very important to know how it is calculated, because not being aware of one’s credit can actually cause the borrower to pay dearly. Lower the credit score, higher the rate of interest. Each is inversely proportional to the other.

Biphoo

28 Aug 2017

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