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Understanding Debt Management and Credit Scores

When applying for a loan, another credit card, etc. companies, banks, Loan agents look at your credit history or your credit rating. Credit rating is the interpretation of your credit history. Your credit history involves almost everything from loans, bankruptcies, Mortgages to even late payments. Basically, your credit history is the main source for your credit rating. Having a good credit rating helps a lot in getting good insurance deals, a plus in employment, and applying for loans such as for a car, house, etc. On the other side of the coin having a bad credit rating can hurt…a lot! It can prevent borrowing money and raise interest levels you are asked to pay on loans you do receive.

The most used credit rating system is FICO which has a range of 300 to 850. The higher the score is, better opportunities will be available.

In obtaining insurance, insurance agents look at a person’s credit rating to determine whether it is worth the risk to lend the money. And if the agents decide to lend you money, then your rating still affects the rates at which the Insurer would supply to the applicant. For loans, the Lender looks at the applicant’s credit rating also to determine if the applicant has the credentials to be awarded a loan. Having a bad credit rating means that you were probably struggling with financial problems, from bankruptcies to even something small like a late payment. Awarding a loan to a person who has a low score is a great risk for the company -- they might end up not getting paid.

A good credit offers a little bit of ease and insurance for the lending company. It almost gives a guarantee that the lender will pay when bill is due. A good credit rating, nowadays, also has some effect on employment. Employers today now have the habit of looking at the applicant’s credit rating as a means to measure the individual’s trustworthiness and reliability. But this way of screening applicants is somewhat unfair. Nobody is perfect, people make mistakes sometimes and some have made some very bad ones. In order to avoid such a problem, maintaining a good rating score is essential.

As credit cards continue to rise in popularity and use all over the world, a good credit rating is a great asset wherever you go, whatever you do, and building and maintaining a good credit rating only entails a little discipline and responsibility from the user. Spending more than you make is a definite negative practice for building a good credit rating. Spend only within your budget or your salary. When buying, prioritize things that are needed not wanted. Another issue is pay bills on time to avoid interest from credit companies. Plan ahead and budget your money, this way you avoid getting into debt.

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