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Understanding how your credit score affects your credit rating

Understanding how your credit score affects your credit rating

With so much conjecture about credit ratings, the discussion about credit score is generally overshadowed and there are not too many people who actually understand how their credit rating score is calculated. What they do know, however, is the fact that a poor credit rating results in higher interest rates while a good credit rating has the power to save you substantial amounts of money.

The intricacies of your credit score

Your credit score is comprised of the overall debt that is outstanding, the length of time that a credit rating has been in effect for a consumer, the amount of new credit that is found in the profile, and also the payment history as well as the types of credit the consumer uses. The credit rating score weighs most heavily the payment histories while it pays the least attention to the types of credit the consumer uses or the amount of new credit that is figuring into the credit profile.

Getting a good credit rating

What you must realise is that there is no magical repair kit that can turn a poor credit rating into a good credit rating overnight but you can get help from companies with specialist knowledge and influence.

If you have a lot of outstanding debt, you should look for ways of dramatically decreasing this. In addition, late payments need to be caught up and accounts must be brought current. Finally, viewing your credit report can help you confirm that all listings of past bad debt are correct; otherwise, you can follow up entries and try to have them removed.

For more information about getting on track, read How to fix a bad credit rating.