credit rating meaning

What Does a Credit Rating Mean for Me?

When the topic of credit rating appears in a conversation, most people feel the intense need to bang their heads against a wall. Why should you listen to such a boring and dry subject?

However, these credit ratings are actually very important. If you are a young person who doesn’t specifically own something of value (like a car or a house), you might want to continue reading.

The Deal with Credit Rating

A credit rating is more or less a financial risk assessment that determines whether or not you can obtain financing from a money-lending agency. It determines if you can keep up with the financial commitments judging on your previous financial obligations.

The business which lends you money has full access to your credit score, no matter if it’s a bank or another financial institution. They will use that score to determine if you can manage to pay back the money and check if you aren’t too risky for that credit.

How to Pass the Credit Rating Test

If you want to be a good candidate for a loan, you need to keep a few things in mind. These will determine whether or not you are a risk for that credit.

  • Pay your rent on time: If you’re renting through an agent and not a private owner, this can be very important. If you receive late notices for your payments, the rental agencies will record everything. When this is accessed and reviewed by the bank, it might put a shadow over your credit rating.
  • Save regularly: If you add a set amount of money into an account each month, it will show the bank or the lending company that you are responsible with your savings.
  • Get your pay through a bank account: Since your money will appear in your bank account, it will definitely help boost your credit rating. It will also prevent you from blasting all the cash too easily.
  • Pay your bills on time: This makes an average of 35% of your credit rating, which is why you need to pay close attention to it. By paying your bills on time, you will gain credibility in front of the loaning companies.
  • Avoid late fees: A great way of avoiding any late fees on your credit card is by setting up a direct debit card through your bank account. That way, money will be transferred every week, month or fortnight onto your credit card.

Following these steps will come to your advantage, especially if you’re applying for a home loan. You needn’t worry about one or two forgotten bills – we are all human, and we make mistakes. However, do not let them linger. The lending companies want to work with you, not against you, but there’s a limit to what they can overlook for your credit rating.

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