In today’s lending environment, credit is essential. Unfortunately it’s assumed that everyone understands credit, however the truth is that many of us have no idea how affected we are by credit in our daily lives.
A credit bureau report is a tool lenders use that shows a breakdown of the debts you have and how your repayment history has been. Within this document, you’re given a rating which is called a beacon score. Beacon scores of 680 or higher are considered excellent and reflect that payments have been made on time and that you can appropriately handle being loaned money. If your beacon score is 650 or lower, then it becomes more difficult to receive financing. Here are some tips to help you be prepared for borrowing any money in the future.
Make sure you have active credit, whether it be credit cards, lines of credit, or loans. A common misconception is that no credit is good credit however this isn’t true as lenders base your viability as a client on your repayment history. If you have no history, they will not be willing to lend any money to you.
Make sure the credit you do have is paid on time. This may seem like an easy thing but it’s not difficult in our busy lives to miss a payment or two. When this happens two or three times in a year, then it becomes an issue.
Make sure you do not go over your credit limits. When a credit card is over its limit, it significantly impacts your beacon score.
Having access to a lot of credit is not necessarily a bad thing. Many active credit cards that are used once a month and paid do not negatively impact your score. In fact, having access to more credit reflects positively on your beacon score.
Having your credit bureau report pulled frequently while you’re shopping for a car or trying to see if you will qualify for credit cards has a negative impact on your beacon score. When your credit is accessed multiple times within a short period of time, it reflects as credit instability and will lower your beacon score. While this isn’t always avoidable, it’s beneficial to try and limit the number of times you allow your credit bureau report to be pulled.
