When a person applies for a loan, credit score is the crucial factor which will be considered, before sanctioning the loan. There are three, major credit bureaus which keep records of all credit transactions of every individual. Based on this record a credit report is generated for every individual and depending on this report a credit score is calculated. A person holding a good credit score will be eligible for a variety of loans, credit cards and mortgages.
More the credit score, better will be your credit rating. So what is the highest credit score and what scores would be considered good? Well, the highest is 850 and it is not so easy to achieve this score Credit score is based on several factors. The bureaus consider how timely your loan repayments are, and how much do you pay back. Do you always stick to the minimum repayment amount limits or do you make full payments? How long does it take you to repay a certain debt amount? All this criteria is considered while awarding a loan credit score.
Generally a credit score, of 680 and above is considered good. With such credit scores you can qualify for mortgage loans and prime rates. Everyday lenders are flooded with requests for different loans and credit score is an important tool used in processing so many requests. A simple number which is the credit score will tell the lender if you are a potential risk or a good client. Each lender will also have his own system of approving loans, but the credit score will help short list the potentially good clients.
Your loan credit score will depend on your credit history. The credit history will have details regarding your past debts and the time you had taken to repay them. It also show all the outstanding loans and the amounts you have already repaid. Outstanding debts and your frequency of payments will have a direct impact on your credit score. If you have been consistently late in your payments your credit score will drop drastically. Regularity of all payments give a boost to your credit score and also if you pay more than the minimum amount.
You can get to know your loan credit score for free online and then you can work on it to make it better. Start paying your debts on time and increase the installment amounts you repay. Also reduce or stop usage of credit cards.