Description: The article tells us about capital one credit wise. The author introduces what are credit scores and credit file and also how can your credit affect your life. A good credit is very important for everyone does anything in society.
‘Credit scores’ are used by banks to help them decide whether or not to lend money to someone. They’re usually a number between one and a thousand. Whether you release it or not, everyone including you who’s ever had a bank account paid an energy bill. Even they had a mobile phone contract,they will almost have a credit score. Credit scores are generated by organizations called ‘credit reference agencies’ who calculate scores using information contained in people’s ‘credit files’.
A credit file is a record of someone’s borrowing activity alongside information such as whether they have paid household bills promptly and whether they are on the electoral roll. If someone has a good credit score then it will be easier to borrow money. If they have a bad score it will probably be harder and more expensive. A good credit score depends on a variety of different things.
First, banks want to know that you’re who you say you are which is why they check your details on the electoral roll. Once they know who you are, they want to know whether you will be a responsible borrower. They’ll know that if they see that you’ve borrowed in the past,have paid money back in full and on time and haven’t defaulted on payments.
Actively avoiding borrowing all together means the banks can’t judge what sort of borrower you might be. So it doesn’t help your score. Banks will also see you as being reliable if you have a history of always making prompt repayments on loans,other debts and energy bills. That includes credit cards.
But how people use their credit card may make a difference too. To banks, using credit cards to take money out of cash machines can be a sign of someone who spends more than they can afford. It’s also worth knowing that if you are financially associated with someone else whether by sharing a bank account or a mortgage with them. Then their credit score can be linked to yours. So, if you’re associated with someone with a good credit score,banks might be more likely to want to lend to you. But if you’re linked to someone with a bad score you could be viewed as a higher risk.
Finally,whilst shopping around for things might ordinarily be sensible when it comes to things like loans. Making lots of applications can damage your credit score. When you make an application, most banks perform something called a ‘hard credit check’ which can leave a mark on your credit file. If there are too many marks it seems like you’re being rejected by lenders or you are trying to borrow more than you can afford.
A way to avoid this is to get quotes from a bank like TSB which offers ‘soft credit checks’. These checks leave marks that can only be seen by you and TSB but not other lenders. Credit scores are a fact of life but understanding why they exist and how you can improve yours can help when it comes to borrowing money in the future.