Monday, May 7, 2012

Understanding How Credit Reports And Credit Scores Work

Your credit rating is very important if you wish to be able to continue to be approved for loans, credit card applications, and get good rates while in the process. The reason for this is that all financial institutions use your credit rating to help them during the decision making process. In short, if your credit rating is good, they will approve your loan, and if not, they will either disapprove it or approve it at a much higher rate.

Although you already probably have a good idea on where your credit rating stands, since it is you that makes payments on your credit cards and other loans, the first thing you need to do to find out exactly how you are doing is to get a copy of your credit report. You can easily get a copy of your credit report by going to the Irish Credit Bureau (ICB) website to apply for a copy on your credit report online.

Once you have your credit report with you, go over the details of each and every loan, and every credit card account on the report. It will show you not just the payment details of each loan, which will show if you paid on time or paid late, but also list the financial institutions that recently accessed your credit report. On the enquiry part, you should see the credit scores that was sent to the financial companies that asked for the report. Note that some companies will just ask for the Credit Bureau Scores (CBS), while some will ask for the Global FICO Score as well. It is not really important which rating system they as for, because they all basically use the same criteria for computing your scores. The important thing is that you get an overview of what your current credit score is.

The scoring system according to ICB is as follows:
Lowest Score (Highest Risk) Highest Score (Lowest Risk)
ICB CRIF 1 367 548
ICB CRIF 2 330 550
GFS 300 850

Obviously, if you find your scores on the low side, you will have a bad credit score. This will definitely explain why you are being turned down for loans or being offered high rates. The good news is that you can improve your credit score in time by always making your credit card payment on time, settling loans that are already in default, and acquiring better money spending habits. To ensure you always make your credit card payments on time, you can set up direct debit payments on your online credit card account. You can also do a balance transfer if you have several cards so that you only have one account to worry about, and not end up missing due dates.

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