credit score

In these fiscally trying times, it can be difficult to manage your personal debt. Credit rating can effect what types of loans you can get, and how much interest you’ll be paying the bank, on anything from auto loans to your house payments. No matter what your rating, there are steps that you can take in order to manage your debt and improve your credit rating. If you have due payments, it would be better to apply for an unsecured personal loan , and pay credit bills in order to improve the rating. With a little bit of time and some smart financial decisions, you can be on the way to a perfect score!

What Is a Credit Rating?

Credit scores are measured by three major credit bureaus: Equifax, Experian, and TransUnion, who look at individual’s financial files and determine their “creditworthiness”. The scores these companies give range between 300 and 850, with 601-660 being an “average” score. Anything below 601 is considered “bad credit” and anything above 661 is considered “good credit”.

How Does My Credit Rating Affect Me?

Let’s take an example of three different buyers, all purchasing the exact same car with a $10,000 auto loan to be repaid over the course of 5 years. Lisa has a score of 750, Bill has a score of 605, and Jerry has score of 500. Each one will be charged a different interest rate, which will make for different loan payments.

Lisa, with the 750, receives a 5% Interest Rate, making her monthly payments on the car note total $189.00. Bill, having a score of 700, would receive a 12% Interest Rate, making his monthly payments total $222.00. Jerry, with the low 500? Jerry gets a 25% Interest Rate, totalling $294.00 per month.

past due payment bad credit scoreThe Interest Rate determines the Interest Paid. Jerry will, after 5 years, have paid his lender $7,611.00. Bill, in the same 5 years will have paid $3,347.00. Lisa after 5 years? Her interest would only amount to $1,323.00. This is why it is so important to maintain good credit. The thing to remember is that your credit rating is not a fixed number – it changes depending upon whether or not you are paying your current debts.

The longer you do not pay the companies that you owe money to, the lower your score sinks. But you can take steps in order to rehabilitate your credit score, and it’s not as difficult as everyone thinks. You can hire a professional to help you, or do it on your own.