What Your Credit Says About You
Each day, companies rely on the information in your credit report to help them decide whether to trust you with their money. With this information they decide what interest rate to give you and also what the loan terms will be. Because the bureaus keep track of your credit information, your credit report has become a means of information. You credit report is an important device that serves different purposes for different people.
For a VA lender, your credit report is used as a device to determine if you are worth the investment, and how likely you are to repay the loan. It will also show how much your interest should be, and what fees to charge you based on the risk you represent. For an insurance company, your credit report is used as a tool to help anticipate how likely you are to have an accident or file a claim. For an employer, your credit report is a tool to predict whether you’ll be a dependable trustworthy employee. For a landlord, your credit report is a tool to determine whether you’re likely to pay rent on time. For you, your credit report is a tool to help you understand how you’ve handled your finances in the past and how you’re likely to handle them in the future. It can also allow you to know what you qualify for. If reaching certain financial goals is attainable or not.
Your credit report may also indirectly foresee your potential behaviors in other areas of your life. The fact that you have a history of making credit-card payments late may tell a landlord that your’re likely to be late with your rent, too. A history of bad loans may suggest to a boss that you aren’t someone who follows through with commitments.
Your credit history can tell others what type of a person you are. If you are a person that follows through with commitments. This is a trait important to most people, whether they’re looking for a reliable worker, a responsible nanny, or a dependable renter. Needless to say, a person or company considering lending you a size able sum of money will want to know the same. Remember lenders don’t like to gamble they are in the business of making money, and they can’t do that if the borrowers won’t pay.
Depending on large part on your history of following through with your financial promises, you’ll be assigned a credit score. People with higher scores generally get the best terms, including lower interest rates and reduced minimum down payments. People with low credit scores can usually get credit in today’s economy, but they pay higher interest rates and possibly additional fees or insurance. Lenders will not put themselves into a position where they will lose.
When it comes to your credit score, following through with your promises is only half of the battle. The other half is doing it on time. It’s a fact in the lending business that the more overdue the payment, the more likely it will not be paid at all, or paid in full. This is why, as you get further behind in your payments, lenders become more anxious about collecting the amount you owe. In fact, if you’re very delinquent, the lender may want you to pay back the entire amount at once rather than as originally scheduled. So the longer you take to do what you promised, the more it costs you and the more damage you do to your credit score.