Posts Tagged ‘credit application’
The Cost of Credit
It is important to understand the costs of various forms of credit. Some forms of credit may be easier to get than others, but whatever the case, provided they are accompanied by a cost, which can often be high.
If you are thinking of applying for a loan or open a credit account, your first step should be figuring out how much it cost, and the second is whether or not they can afford it. Then you find the best options. When requesting credit, there are three main terms that need to be familiar:
* Capital: The amount of money you are borrowing.
* Interest Rate: What the lender charges you for letting use your money. It is a percentage of capital (charged by year, month, or week).
* Costs Associated: Within these costs is what you should spend the lender to review your credit application or service your account (maintenance costs, charges for services rendered, charges for arrears and other).
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What Is Credit Score?
* Your credit score (or grade) is a number attached to your credit report that tells a lender how likely you are to repay a loan or make credit payments on time.
* The actual number is between 350 and 850, as the FICO score, and between 510 and 990 according to the Vantage Score.
* A higher score means a better chance to pass a credit application. It is important to be very careful while paying the debts you have, because your score changes according to the history that you will build. For example, if you stop paying a loan, your score will fall. Likewise, if you start paying all your bills on time, your rating will improve.
Most credit scoring systems consider at least the following factors:
* Payment History: Do you pay your bills on time?
* Amount of Debt: Does a lot of money, and in many different accounts?
* Extension of credit history: How long have you had credit?
* Types of credit: Do you have a mix of credit (credit cards, installment sales, mortgages, etc..), Or only one type of credit?
* New credit: Are you assuming many new debts?