Credit is money that is being borrowed from a bank or other financial institutions. There are different types of credits such as credit cards, mortgage and more.
The ten facts about credits are as follows:-
- Credit are given to people based on their ability to repay the lender.
- Credit reports shows an individual's eligibility and how worthy an individual is of credit.
- A credit score consists of a three digit number that determines a person's ability to pay back what he or she has borrowed.
- The higher the credit score, the better it is and there's a high chance of getting accepted to loans and other credit required things.
- Good credit score can lower interest rate.
- One must pay back what he/she borrows, with interest.
- Credit scores are required when buying house, car and for loans.
- Credit scores can increase if one pays their bill on time.
- Credit scores can decrease if one doesn't pay their bills on time.
- The more responsible one is with their payments, the better their credit score will be.
The formula used to calculate credit score are as follows :-
- 35% on your payment history
- 30% on the amount you currently owe to lenders
- 15% on the length of your credit history
- 10% on the number of new credit accounts you have opened or applied for (fewer is better)
- 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)
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