Most of us, at some point in our lives, will need to borrow money from a professional lender. The most common ways of borrowing money are through mortgages or credit cards, but just about any service that you use now and pay for later counts as credit in the broader sense.
The importance of credit to us means that our ability to get credit is also important, and to a large extent this depends on your credit rating. Everyone has heard of a credit rating, but very few people know what it is, nor that you can take significant steps to improve it.
The first thing that you should do is an annual check (and another check before you apply for any major financial products). Check out one of the big credit agencies like Experian and make use of their credit checker tool. This will give you access to the information that any lender would see if you were to apply to borrow money from them.
So what is this credit rating? A credit rating is essentially a list of every time that you’ve borrowed money from a professional lender and the experience that they had (the focus is on them and not on you), late repayments and problems will be recorded, along with how much money you borrowed, how much of it you paid off (hopefully all of it) and your relevant contact details.
As with any other transaction credit is a two way street, it might not be your fault if you were late on a repayment for example, however, on your credit rating only the fact that you were late will be recorded. Therefore, in such situations you should take steps to make the full account known, as this can improve your rating.
But why worry about your credit rating? Well, the first reason is that if you have a bad rating you may not be able to get credit when you need it.
A more important reason for most of the population is that the better the rating the better deals you can get. A better rating makes you a safer proposition so the bank (or lender) may not feel as compelled to protect themselves by charging a higher rate. Of course this isn’t always true, and in unique situations a better credit rating can attract an inferior deal, but in general, the better your rating, the less you will have to pay for credit.
So, as you can see, it’s important to know the situation of your credit rating and, if there are any problems, to try to improve them so that your rating improves and in the future you can attract cheaper deals.
For more information about credit ratings check out this site.