The credit score shows someone how desirable they are to a lender. When a lender sizes you up to determine how much credit, if any to grant you, it usually looking at your credit report and measures your past credit history performance based on your credit score. Generally, a lender usually looks at these 3 keys areas: character, capacity and capital (sometime known as 3Cs) to project how responsibly you handle your credit obligations. Hence, to qualify for and establish good credit, you need to get good score in these 3 areas. Let discuss it one by one.

Character

When you promptly pay principal and interest on your mortgage, student loans, credit card and other loans, you established a good character. By demonstrating a strong sense of character, you persuade the lender to trust that you will make a good-faith effort to pay your bills even if you run into financial difficulties.

Capacity

Capacity measures your financial ability to assume a certain amount of debt. Whenever you apply for a loan, the lender will ask for your annual income statement and your investment portfolio and he/she also want to get to know your other income sources. Many banks set minimum income requirements that your must meet to qualify for certain dollars of credit. The higher your total earning, the larger your credit capacity will be. Besides considering your sources of income, lender also takes into consideration of your existing debts. They prefer it if no more than a maximum of 36 percent of your income pays your total fixed expenses, and if no more that 28 percent of your income pays for housing, either mortgage or rent. The more debt you incur, the less credit lenders extend.

Capital

Lenders consider stocks, bonds, mutual funds, real estate, collectibles, cars and other asset as your capital that they can disposal to retire your debts if your character and capacity do not prove sufficient. Sometimes, lender may need you to pledge your capital/asset for your loan if your character and capacity are not sufficient to persuade lender to approve your application.

The Benefit of Having Good Credit

Lenders love people with good credit record to borrow money from them. That’s why people with good credit get a better offer in applying for credit. Among the benefits of being a good credit are: the lower interest rate, faster application approval, more attractive packages with more choices. It’s mean “Save More Money If You Have Good Credit”. If you have good credit, you even can negotiate with the lender to lower down the interest else you will turn your head to other lender.

In Summary

Having a good credit score means you have more options available to you. You can get loans with better terms and rates and you have more available to you when it comes to types of loans. Good credit record build over time, hence it’s never too early to start to establish good credit record for yourself and qualify for better options at the time your need it

A negative credit history is the single largest factor that can prevent you from getting an apartment, loan, or job. This is because all insurance companies, banks, landlords, and prospective employers check out your credit card report before sanctioning a loan or offering a job. Therefore, it becomes imperative to fix your credit report if there are errors in it. Your future transactions depend on your past history.

First of all, you should immediately order for a free copy of your credit report from any of the three major credit bureaus: Equifax, Experian, and TransUnion.Once you get your copy, review the mentioned information thoroughly. This means you need to check for mistakes in the following sections: Personal Information, Monthly Account, Public Information, and Inquiries. You must also ensure that there are no spelling mistakes in your personal information.If you find errors in your credit report, you should inform in writing any of the three credit bureaus immediately. Also ask for an acknowledgement of receipt. However, waiting for a mistake to be corrected by this channel will take about 30 days, because this is the time the credit bureaus take to conduct an investigation with the information providing agencies. You can also fix the mistakes on your own or solicit the services of a rescorer.

Fix it Yourself

After reviewing your credit report, contact the creditors and argue your case with them. If you succeed in getting the errors fixed, the concerned information will be removed from your credit report. Remember to take a letter from the creditor acknowledging the error. Also, remember to keep track of all the communication that takes place with the creditors or the credit bureaus. That means all communication should be in writing and you must have the receipts, which you can provide as proof to the credit bureaus, if the need so arises.

Rescorers

If you are not up to the task of dealing with the errors yourself, you can take the services of rescorers. These rescorers act as middlemen between lenders and credit bureaus and speed up the process of error correction. These brokers collect proof from the borrowers and pass on the information to the credit bureaus. If the credit bureaus confirm that an error was made, they will update the borrower’s credit report to reflect the change.