ost of us forget the perils lurking behind even a small credit and continue enjoying life by adding on more to it whenever there is an excess and beyond the limit requirement. But it is very important for all to get to know, understand and have a complete knowledge about how this credit works, what the dangers are and how is this to be settled without a trouble. Here is a small guide that would tell you all about how to manage credit and what role does credit score play in making you successful in acquiring a credit.
What is a credit?
The needs and demands of people are increasing day-by-day. But the money on hand is not sufficient to meet all of them and hence to meet at least the topmost important ones they go for a borrowing or a loan from outside sources like banks and financial institutions. These institutions agree to grant the required loan on few conditions and the first and foremost is the credit score or credit of a person which is considered and demanded as the predominant document from the applicant.
This is a report that clearly explains the credit standing of an individual detailing all about his credit history. This report explains and elaborates all about what were the previous loans taken by the individual, his repayment structure, loan settlement pattern etc… So this is an indicator and acts as a gauge in determining whether the applicant is fit for the present loan. This is one of the major documents that an applicant will have to attach with the loan application without a mention because this acts as the basic document to qualify the applicant for the loan.
This report, apart from the above, also comes with a report from the various lenders from whom the loan has been procured, their statement on what type of loan was lent, the interest payments, the reason for the loan, the amount lent as a loan, the date of issue etc… So it is like a certification that double verifies and qualifies the applicant for the present loan with a strong backup. This credit report is also used to generate FICO scores.
There cannot be a person who has not gone for a credit or a borrowing at all because the needs and demands go way beyond what a person gets in his hands as earnings and definitely the amount on hand is insufficient to meet some really big expenses like buying a house, a car or any other such big investment. So in such cases, there arises a necessity to take the hands of a bank or a financial institution for cash for compensating the deficiency on hand.
Importance of credit report
This report is not important just because you are planning to go for a loan but is also important for those who do not have the necessity to go for a loan immediately. This report clearly shows the credit history of a person and highlights the major aspects like prompt payback or default in paying back, the strength of the credit etc thereby making a person suitable or unsuitable for any other loans in the future. This report reveals a lot about the credit standing of a person and all these various pieces of information will have to be put together to arrive at a constructive decision about lending the requested money in the name of the loan to the person.
It is also important to understand and get to know about the agencies that help us with this credit report. They maintain all files about all the borrowers who have gone for a loan from different lenders. So they act as repositories of some very important information that comes in handy while deciding about the loan status and capability and eligibility of a person in acquiring one. Lenders who have been approached by the borrowers for a loan will fall back on these agencies, collect information about the borrower and his borrowing and payback patterns and based on this, they work on whether or not to lend a loan to the borrower.
So whether you are in need of money or not, keep this report handy for it can come to help at any time in life.