A good credit rating will influence your financial life. It can mean the difference between getting that mortgage or low interest credit card or not. Banks and other lenders will check your credit rating before making a decision on whether to trust you with their money or not.
A credit rating is not based entirely on the size of your income, although it would not hurt it either if it is on the higher side. It is more about your repayment history of credit. In the case of mortgage lending especially banks will not lend an amount where your monthly repayments will go over a third of your total monthly income.
This is one way the size of your income can limit your borrowing power. It does not mean that you cannot get yourself where you want to go with your finances. But credit rating is more about your repayment behaviour; do you pay your bills regularly and on time? In short do you respect your payment obligations? This is more important information for lenders.
It is therefore, advisable to get a credit report from any of the credit reporting agencies before considering applying for any major credit. If it is not in good standing one needs to take steps to make credit repair actions. Equifax and Trans-union are the two major credit reporting agencies in the United States and Canada.
They receive information from credit and utility companies and keep this information in your file. Most banks and lenders and more and more utility companies will get a report on you from them before offering you credit or services.
A credit report will include a credit score which is a point based measurement on a scale of 300 to 900.The higher the score the less risk lenders see in lending money to you. A good credit score can not only secure you the funds you need but also at a lower interest rate than usual.
There are several factors that are taken into account to arrive at your credit score. Some are whether you carry balances on your credit card from month to month, bankruptcy, the length of time you have had credit and the debt owing at the moment.
There are some simple things to do to keep a good credit score. Pay your bills on time and in full if you are unable pay at least the minimum, check your monthly statements to make sure it is accurate and make corrections if needed, and talk to creditors if you have problems paying and know the terms and rates of any credit cards you receive.
Some bad things to do for your credit score is to go over your credit limit and not fully understanding the terms of use of your credit card before using it. It is also advisable not to waste time before reporting any anomalies seen on your statement for any items not bought by you.
