With the current economic conditions, most consumers find themselves borrowing funds, either from a direct lender or banks to meet their budget. Borrowing isn’t actually a bad idea. But what most people don’t know is that the more you borrow without paying the debt on time can greatly affect your credit score, and it may be hard to qualify for loans in future. Again, very few people know what a credit score is, and some of these people may not even differentiate between a credit score and a credit report. This can be dangerous since you may not know what good or a bad credit score is, and the measures you can take to ensure that your credit score improves.
If you have happened to apply for a loan or credit recently and you were denied due to a poor credit score, you may tend to think that repairing your credit is an almost impossible task to accomplish. But this is never the case. In fact, you may be surprised that your credit score can improve in as little as a month! But to achieve this, you need to know exactly what it takes and the steps that you have to take to ensure that your credit score improves.
Once you are approved for a loan, you will be entering into a contact between you and the loan lender. Knowing this is helpful considering that there are thousands of consumers who don’t even have no clue of how the credit industry works. The agreement you sign with the lender will clearly indicate how much money you have borrowed, the interest and other additional fee charges, and what the loan term is.
If you do not pay back the debt as per the agreement, the lender will report this information to the credit reporting bureaus which will include the details in your credit report. This will have a negative impact on your credit score. Credit reports and credit scores are completely different things, contrary to the misconception that these two are the same. A credit report is basically a summary of your credit history- how many loans you have applied for, whether you have paid the loans on time or you have missed some payments, etc. On the other hand, a credit score is the numerical representation of your credit history. The main factors that determine a consumer’s credit report include your payment history, credit utilization, the age of your credit accounts, new credit and credit mix.
The good news is that even if you have bad credit, it doesn’t mean that there are no options available. There are actually a number of things you that can guarantee you fast credit repair. The first one is to ensure that you pay your debts on time. You also should not apply for several loans at the same time since this can affect your score further. Lastly, it is also important to ensure that you keep your credit accounts open even when you have paid the balances in full. This is because the age of your credit accounts also contributes to your FICO score.