A person’s credit score and rating is a reflection of their financial health and credit-worthiness in meeting financial responsibilities, such as for long and short term loans, mortgages and bill payments. Through improving credit score and rating, a person may improve their financial status.
Being credit-worthy gives lenders confidence in a borrower to approve either their long or short term loan applications. Lenders are less likely to do so where the credit score or rating is low because it indicates that the individual is at higher risk of loan repayment default. Borrowers may then have their loan applications declined or may need a guarantor for loan surety.Guarantors may include relatives or business associates. Individuals may gain insight into their credit-worthiness by registering with a credit reference agency and obtaining their credit report.
Credit reports impact long or short term lending criteria, loan terms and interest rates. If credit reports are weak, an individual may incur higher costs when applying for credit. Improving one’s credit report is a means of raising financial status and gaining cost-savings over the longer term.
The top four ways to improve financial status include:
- Providing credit reference agencies with correct credit history information.
- Closing all unused accounts and using active accounts responsibly.
- Paying outstanding debts or making affordable arrangements to do so to prevent default.
- Building a credit history where one is lacking and not making unnecessary loan or credit applications.