4 Quick Facts You Should Know About Credit
When it comes to credit there are a couple of quick facts that you want to know before you start your credit journey. Credit is necessary for many of life’s big financial decisions and having good credit will be extremely important.
Knowing how to navigate through creditors, debts, and loans will be important if you want to end up with a good credit score and history.
Millions of Americans suffer from bad credit and they could have avoided some of their problems if they knew some of the key things about credit. Knowledge is power and knowing all of your options and choices available to you when it comes to credit can make a big difference.
In order for credit companies to give you credit, they have to be able to know how you preform and how risky of a lender you are. For this reason, you get a score so that a lender can have a way of judging if they want to offer you credit.
This score is also known as your FICO score and is determined by your payment history, debt burden, length of credit history, the types of credit you’ve used, and any recent credit applications.
Each one is carefully considered and measured to make up your score which will fall anywhere between 300 and 850. The higher your score the lower of a risk you pose on defaulting to a creditor, the lower the score the higher the risk you pose on defaulting to a creditor.
So basically you want a high score so that a lender will be more willing to open a line of credit for you.
Affects Future Loans
You might think that your past misfortunes with credit won’t affect you later on in life, but that is a huge misconception. All of your past credit history can still affect any future loans or lines of credit, applications, and financing.
This is due to your credit report, which is a detailed guide to all your past credit behavior and failings that allow for lenders to do a background check on you. With this report a creditor will be able to make their decision on whether to open a line of credit for you or not.
The only way to erase a debt off of your credit report with no negative effects on your credit is by paying it off completely. Remember that bankruptcy stays on your report for an average 7 to 10 years depending on which bankruptcy (chapter 7 or 13) has been filed.
Bad Credit Can Stop You From Getting A Job
Not only can your personal debt affect your future finances but it can also have an effect on your job prospects. An employer will sometimes request a credit report depending on the position you applied for and may use that to decide if they want to officially hire you.
This is important to remember in any financially focused job because when you struggle with your personal finances this can worry employers into thinking that you could struggle with work-related finances or are untrustworthy, as well.
The Only Way to Get Rid of Debt Is Paying It Off
There is no quick fix to getting out of debt but the only proven mode of eliminating debt is paying it off. You might think that paying off your debt will take a long time, which it may in some cases, but as you get closer to paying off your debts, the faster your credit score will improve.
Any payments you do make toward your debts can and will make a difference on your score; however, the important thing is to make payments.
Try talking to your creditors to set up a payment plan or seek help from a debt settlement company, its experts will be able to help you start paying off your debts.