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Wednesday, February 11, 2009

Why Your Credit Rankings Are Important

By Steve Collins

Should you find yourself in the position of needing to apply for a loan, your credit ranking can make or break your chances. That one modest number that is your credit ranking will tell a potential lender whether you are a golden applicant for a loan or whether they should be concerned about your ability to repay the money you borrow. Generally, credit rankings range from 375 to 900, with 900 being golden and 375 being bad. Most of us have a credit ranking that falls somewhere in the 600s.

numerous things are considered when a credit ranking is being considered. The two biggest factors are how much debt you are already carrying and your payment history. These two factors carry around 65% of the weight in most credit rankings. So if you have an occasion, it is a good idea to pay down some of your current debt before making a new loan application.

You can not do much to change your credit history, but it is always a smart idea to get a free copy of your credit report a few months before making a loan application. This will give you an opportunity to correct any mistakes or clear up any misunderstandings that might have occurred in your records. Getting your credit report ready ahead of time will improve your credit ranking and your chances for getting a loan.

Your credit ranking is harmfully impacted by any collection action that may have been taken against you. Even an unpaid parking ticket can be referred to a collection agency if your town decides to clean house. Failing to pay your bills on time also hurts your credit ranking.

Since your credit ranking is important to lenders, it should mean a lot to you, too. Knowing your credit ranking going into the loan process can give you a fairly good indicator of the success of your application.

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