All about loans and insurance: Credit rating scale – which factors define the decision of bank to lend you money?

What is credit rating? What credit rating scale is used to define credit worthiness of a borrower? What other factors can be evaluated from credit rating? The ways on improving the credit rating and increasing your credit rating chances to get a necessary credit service? The ways to solve the situation!

Opting for a credit service a person first thinks of visiting a bank or other financial institution. You feel in an application form and hope to get a necessary sum of money. Getting a credit application refusal one often goes to another organization in hope of getting an approval. When several chances fail the client thinks of the reasons of denial. In most cases the true reason to reject in money lending is credit rating.

Credit rating is an evaluation of a trustworthiness and credit worthiness of a customer, a debtor, a borrower to pay the money back. In most cases the credit rating is not a mathematic evaluation. Credit rating scale is usually added with personal opinion of an expert affected by the probability of debtor default and the case of not paying the money back. Credit rating is usually provided by the credit rating agencies each using it own scale of credit rating evaluation.

However what a credit rating is formed of? Usually credit rating tracks your financial history. It means it contains a record of all your financial transactions performing your relations with banks and other financial institutions. But the rating itself is not just a precise numbers and dates. This also contains the information on your income and its stability. It also tracks the history of payments delays and postponing.

Credit scores range is also a useful tool for evaluation of financial health not only for lenders but for customers as well. Knowing your credit score you can define whether you are able to get a mortgage or any other loan, what sum of money can be got and what interest rates will be applied in your case. Getting your score you will be prepared to the next financial contact with bank or other financial institution. Getting a high credit rating score is fine, but what should you do if you have a bad credit score or rather low credit rating? Is there a chance for poor credit clients to get a financial credit aid from any financial organization? The answer is surely yes.

Starting with credit rating investigation. How to view credit score?

Credit rating is formed by credit rating agencies. There are different notions applied to the organizations tracking your credit history. These are credit bureau, USA consumer reporting agency, UK credit reference agency and many others. Simply these organizations collect the information from different resources and accumulate and fuse it in one report defining a financial wealth and trustworthiness of a client.

To view credit score one can use different online services providing you immediate data on your credit history. These services are usually divided into free and toll ones. However the information the reports containing no matter provided on free or paid basis is absolutely identical. To get credit scores free you can follow one of these ways. Annually you can apply and get you credit ratings report absolutely free. You can view it on the special website filling in the form of annual credit report request, order by a toll-free hot telephone line or order the report via email. The report will contain the information on where you live, how you deal with your bills, whether you have been arrested or sued and on filing bankruptcy.

After getting your credit rating report you will need to read it and interpret properly. There are different scales used to evaluate your credit rating. You can find FICO score which will be shown by a number ranging from extremely low of 380 till the perfect 780. FICO is just a calculating service analyzing the data provided in your reports, its name being an Acronym of Fair Isaac Corporation which eventually created the service and the system of calculation.

In your FICO score the credit rating is affected by the next factors as payment history determining 35% of your rating number, sums of money owned affecting the rating for 30%, length of your individual credit history defining the 10% of your rating score and type of credit services used affecting the rating for 10%. Another factor considered in the FICO score is new credits also affecting your score number for 10%.

However FICO is only one of available credit score scales used by creditors to determine your trustworthiness. You can also see an “R” and “I” systems added with 0-9 numbers (used in USA and Canada). In these credits ratings the letter I stands for installment loans as auto or mortgage and R stands for some revolting credits as credit cards and other credit lines and loans. In this system any letter with 0 indicates you being new to credit rating history and your tracking is not enough to judge whether you are a responsible borrower or not. Number 4 with any letter indicates that you paid your previous debts in 4 months. Still number 9 stands for the worst credit history and bad debt. The chances in this case are very low that you will get a loan. But one should not forget about bad credit loans and services catering for customers with poor credit. No matter what credit rating scores scale is used you can find any interpretations of symbols and letters online.

Getting your credit ratings report and finding thus out your trustworthiness for lenders you now can think on how to improve credit rating or how to maintain it as credit rating is a rather fragile thing and any careless move can worsen your scores.

There are several recommendations on how to increase credit rating. First you should learn what credit rating number will be enough to get a loan you need. This is of great importance in case of urgent need of the deal. To affect credit rating scale may:

- make your debt insufficient;

- not apply for new credit services as instant loans or credit lines increase;

- make the payments regularly.

These steps will not just help to improve your credit score in case it being too low for getting a new loan, but these are of immense importance for maintaining you credit rating as high as possible.

Another way you can improve your credit rating is opening a deposit line in the bank you are going to apply for a new loan. This deposit or deposit line will be a kind of a collateral for your new loan. It will show the lender your willingness to cooperate and your trust to the bank. In simple words you trust the money to the bank, the bank in its turn will trust some larger sums to you. But this rule does not consider the cases with a really bad credit.

Unfortunately our life is too tight bound to finances which are not every time enough to cover the emergencies. There are situations in which you can do well without a new purchase. However there are cases when bank financial aid is of the greatest importance ever. This considers the cases with mortgage (nobody applies for a mortgage with the goal of reselling the house or other estate as interest rates applied will cover all the profit) or for example automobile loan when a car is a driving mechanism of your business or the source of money earning.

That is why keeping you credit rating high is of prime importance. It is strongly recommended to learn your credit report annually and find out whether your credit rating is well. You should understand that there are cases when your credit scale can be affected just by your postponed bills payment. In case you learn your credit report troubles on the early stage you will have enough time to undertake some sufficient steps to improve your credit rating! Taking care of your credit rating you can be sure any lender will willingly lend you a necessary sum of money at the lowest interest rate!