Method 1Displaying Creditworthiness
- Understand why your credit score is important. Your credit score is a measure of your creditworthiness based on your debt history. That is, it measures how likely you are to repay loans based on how well you've payed them back before. Having a low credit score means that you are a risk to lenders, because they may not get their money back. To compensate themselves for taking this risk, lenders charge people with lower credit scores higher interest rates and sometimes also higher fees.
- Know your credit score. Go online to check your credit score. You can do so by searching for the any of the three major credit reporting bureaus, which are TransUnion, Experian, and Equifax. These websites can provide you with your credit score and a report that shows you what lenders see when you're being considered for a loan.
- Evaluate your existing credit score to see how your risk appears to a lender. Credit scores can range from 300 to 850. The higher the score, the higher your creditworthiness. Generally, a score about 700 is considered a "good" score. However, some lenders may consider scores about 650 or 680 to be "good, " it just depends on the lender.
- Having a low credit score will usually not prevent you from getting a loan (as long as it is not extremely low). In some cases, it may be best to take on an expensive loan to improve your credit score.
- Determine whether or not you need to fix your credit score. If your credit score is particularly low, or simply not as high as you'd prefer, you'll need to seek out ways to improve it. This can help you get a better interest rate on your personal loan and save you money in the long run. However, your credit score cannot be improved quickly, and it may takes months or even years of careful budgeting to get your score where you want it.
- Think about how long you can wait before taking out your loan. If you have time, you should consider building up better credit before applying for the loan.
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