Written by S. Thompson | Posted in Credit |

When it comes to their finances many people are completely unaware of the credit score scale and the role it can play in determining their financial future. These days lenders are becoming stricter in their lending criteria when qualifying people for loans, mortgages and credit cards.

Before lenders approve your credit application they will need to determine if you the borrower is a good credit risk. Banks are in the business to make money therefore, they will want to know if you have the ability to repay the money you want to borrow. They can do this by checking your credit report. Anyone who has ever used credit in their life will have a credit report.

The report contains all the financial details about a person. These details can include a person’s account details, credit history, type of credit and the amount of debt owing. This information helps lenders determine how good people are at managing your credit. If you’ve managed your finances responsibly you will be graded with a high credit score. Having a high credit score means you will be charged less on interest rates and have fewer lending restrictions imposed on you.

If you have a habit of running up large amounts of debts and defaulting on loans you will be graded with a low credit score. With a low score you will be deemed a higher credit risk in the eyes of the banks. This can mean a greater chance of having your loan and credit card applications rejected. Even if you are successful with your loan application you will be charged a higher rate of interest than normal.

Now and in the future it will become far less expensive to borrow if you acquire the habit of looking after your finances. The best place to start is to obtain a copy of the 3 credit reports. These are produced by Experian, Trans Union and Equifax. They can also provide you with your  credit score.

If your score is under 700 you will need to make changes in the way you handle your money in-order to increase it. This can be achieved by budgeting, not exceeding your credit limits by more than  30% and ensuring you pay your balances before their  due date.

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