Why do we need a Good Credit Score to get a Credit Card
Imagine a new neighbor in your town asked you for lending her 1000 dollars, will you give her without verifying her credentials or would like to know few things about her. Let's say Sally your long time neighbor gives you positive feedback about your new neighbor that she returned her $500 taken on loan last month. Will it improve your confidence about your new neighbor? Of course, it will improve your confidence.
Same is true for lenders, banks to have a mechanism in place to judge the trustworthiness of a consumer to pay back the loan amount.
Now we know credit score is developed by Fair Isaac and this score is used by all the credit reporting organizations to rank your credit ranking against credit score. First, let see what are important factors, which are key to your credit score? When credit card companies are evaluating your application they look for following information against your name.
- Payment History: How you have been paying your bills in past.
- Amount Owed: How much you already owe to lenders.
- Length of credit history: The more you have positive credit history the more it adds weight to your credit score.
- Type of credit: If you own home or big credit such as car or personal loan which you are paying timely back to lender also shows your credit worthiness. Taking loan for home, car and college may be necessity but other then these three piling loan is bad way fo building credit history
- New Credit: This shows lender’s confidence in you and are offering credit to you against your good credit history. But opening too many credit cards also goes against you especially if they are being used for piling debt. Keeping unused credit is good for credit score.
- Blemish Record: Any negative remarks on your credit report will bring your credit score down.
Read more on why credit score is important and what is involved in building a credit score. <<Read more. >>