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Your Credit History and Rating
Your credit history and credit rating mean everything. In this cold cruel world we live you can't get enjoy the simplest of luxuries without credit. Automobiles cost tens of thousands of dollars, homes are in the hundreds of thousands, and toys cost money.
We finance jet skis, snow mobiles, motorcycles, and other items which all just happen to cost more than we ever have at one time in our life.
In order to drive that nice car we need to finance the money and that's where having good credit comes in handy. People with great credit get a low interest rate, while those with a few blemishes might have to pay a higher rate.
Your credit history is nothing more than a collection of all the loans you have incurred over your life. Some debt goes unreported like the loan at the used auto lot but rest assured most loans are reported to the major credit bureaus.
Your credit rating is simply a numerical equivalent of how well you repaid your loans. If you sign a note promising to repay a loan over three years and you do, never missing a payment and making all (36) payments you are assigned a number which for example purposes could be a 10.
Let's say you do this every time you borrow money, and you are perfect on payments and you carried a few loans at one time, and you progressively financed more money each time you borrowed you would more than likely on your way to a perfect credit score (850).
Other factors are considered by the reporting agency to determine your score such as:
- Own/Rent
- Years at Address
- Occupation
- Years on job
- Department Store/ Major Credit Cards
- Bank Reference
- Debt Ratios
- Number of Inquiries
- Years in File
- Number of Revolving Trades
- %Balances Available
- Worst Credit Derogatory
It's safe to say that determining your credit score is a complex business but it's something worth knowing every time you go to take a loan. Sometimes lenders will try to pass you a higher interest rate as this pays them more when in fact you would qualify for a lower rate at a more reputable institution.
Keep track of your credit history, score and rating very closely. Doing this not only saves you money but allows you peace of mind against identity theft and other identity crimes.