Justin has 5 years of experience as a financial adviser; his key areas are loan consolidation, debt relief, mortgages etc. For more free articles and advice visit http://www.Bills.com.
A credit rating is simply someone's assessment of how well you would be able to pay back money lent to you. Usually, that "someone" is a credit reporting agency; however, creditors themselves will also make their own assessment, which is usually based on the score you receive from the credit reporting agencies and is determined by requirements that vary a great deal from one creditor to the next.
Credit can be established in a number of ways. Perhaps the most common is the opening of a credit card account. In some cases, a secured card (a card that requires you to pay money into an account the creditor controls before you receive a card) may be the way to establish credit initially. You can also use low balance store cards or gas cards that let you prove that you can pay your monthly payments back, before qualifying for a larger balance credit card.
Again, credit is just one person's or one entity's estimation of your ability to repay what you borrow. Once you've established one or more trade lines on your credit, your score will be more directly related to the percentage of credit you carry as compared to the total amount you could carry and your payment history on the trade lines you have. A trade line is any credit account where you have borrowed money and are paying it back such as a credit card, home loan, or signature loan. All your open trade lines and some of your closed ones will show up on your credit report.
As mentioned above, the amount of debt you are currently carrying when compared to your max debt is one factor that figures into your credit rating. If your max debt, or credit limit, is $10,000 and you are carrying $8,620, you're currently carrying over 80% of your max debt, which is more than the credit reporting agencies like to see.
Payment history is another factor the agencies use to determine your score. Your payment history is the trend you set when it comes to paying off your debt, either an on-time minimum payment every month or a less-than-minimum payment, late payment, or other problem even one time. If your payment history isn't spotless, it can cost you points on your credit score, and may cost you money the next time you try to get a loan.
The length of time your trade lines have been open will also affect how your score is established. Closing old trade lines in favor of new ones won't help your score, since your payment history on the new trade lines won't be as long as it was on the old, giving the credit reporting agencies less on which to base your credit score.
Credit and your credit score have everything to do with your usage, management, and payment habits pertaining to the trade lines on your credit report. Be wise in the handling of these trade lines and your score will rise. Make poor decisions and your credit will suffer. Your credit rating is important when it comes to financing cars and homes, shopping for insurance – even when interviewing for some jobs. You'll want to present the most responsible picture, and that means having excellent, well-established credit that speaks for itself.
For more articles on credit rating and how is it established, visit http://www.bills.com/establish-credit-rating-article/
- Related Articles
- Related Q&A
- Secured Loan Finance: Finance the Range of Your Expenses
- Secured Personal Loan Finance: an Inclusive Financial Tool
- Secured Personal Loan Finance: Smart Way to Contain Your Demands
- What You Should Know About Loan Finance
- Car Loan Financing
- Home Loan Financing - Is the Party Over?
- Home Loans Finance in India: a Home of your Dream
- Secured Loan Finance: Finance Your Range of Expense




What to Consider When Choosing a Credit Card
By: Alter Sage | 07/12/2009With the wide range of credit cards available in South Africa, you could probably use a little bit of help choosing the right one.
Credit Cards and Travel Insurance
By: Alter Sage | 07/12/2009Some South African credit cards offer automatic travel insurance when you use them to purchase air tickets.
What is a Credit Card Protection Plan, and Do I Need It?
By: Alter Sage | 07/12/2009A credit card protection plan will ensure that your credit card debt is covered in the event of your death, disability or retrenchment.
What's Your Excuse for not Monitoring all Three Credit Scores?
By: C.w. Linart | 07/12/2009It is incredibly easy to monitor your credit reports and the benefits of doing so are many.
Maximizing the potentials of a low APR credit card
By: junior will | 07/12/2009Indeed, if a credit card is used properly, it can be the most powerful financial tool. But not everybody can afford all the expensive rates of most credit card issuers offer. This is where the low APR credit card ushers in—to help people who plan to maintain a balance on their account and not to pay the full amount monthly. But, what does APR stands for in a low APR credit card?
How FICO scores affect you
By: David A. Krebs | 07/12/2009Maintaining good credit is absolutely necessary for a secure financial future. That’s why Krebs Financial, LLC offers a program that identifies credit issues and implements sound solutions to correct credit problems.
Think of Your Credit as a Job
By: Jessie Frost | 06/12/2009Does this sound like you? You do not have a very good credit score but you want to change your credit report for the better to help yourself and your family. Why wouldn't you?
How To Secure Bad Credit Loan
By: Collins Andrew | 06/12/2009There are certain things you need to do if you want to secure the best bad credit loan. Until you do this you might end up with the worst loan ever. So read this article to get the best.
Understanding Judicial Foreclosure
By: justin narin | 05/08/2009 | MortgageForeclosure is one of the most severe and difficult financial processes for any consumer. Unfortunately, foreclosures are also peaking, meaning thousands of American families are now facing this dire consequence. What does it mean, and what can you do to avoid foreclosure?
Subprime Loans and the Real Estate Market
By: justin narin | 29/07/2009 | Real EstateThe Subprime Loan Fallout is Affecting All Areas of the Real Estate Market
Get the Best Mortgage Refinancing Rate
By: justin narin | 27/07/2009 | Personal FinanceIn order for you to get the best mortgage-refinancing rate available to you, you will have to do a little research and a little math. Because it costs money out of pocket to refinance, it is only beneficial to you if you plan on staying in your home long enough to make up the difference between your refinancing costs and your interest savings.
FHA Mortgage Insurance
By: justin narin | 22/07/2009 | Real EstateThe FHA loan insurance program was created to help first-time buyers get into homes. However, first-time buyers usually don't have 20% down payments and may have a spottier credit history. In order to provide protect taxpayers from paying for defaulted FHA mortgages, the loans include mortgage insurance premiums (MIP).
Find the Best Bad Credit Second Mortgage
By: justin narin | 20/07/2009 | MortgageAlthough it seems strange to take on more debt to improve a bad credit history, a home equity loan may be the solution to your financial problems. Learn when you should consider a loan, and when to look for other options.
Things to Consider with a Refi Mortgage
By: justin narin | 20/07/2009 | MortgageA refi mortgage can be used for several purposes – to lower your interest rate, to lock in a fixed interest rate, to pay off credit card debts, or to combine two mortgages into one. It is a substantial financial decision to make, so make sure you are well informed with information before taking any action on a refi mortgage.
Refinancing Second Mortgage
By: justin narin | 17/07/2009 | MortgageA second mortgage, also called a home equity loan, often has a much higher interest rate than a first mortgage. Discover the money saving benefits of refinancing a second mortgage.
Home Equity Loan or Home Loan Mortgage Refinancing?
By: justin narin | 14/07/2009 | MortgageIf you are considering taking out a secured loan against your home, two of your options are home loan mortgage refinancing with cash-out or home equity loans. Depending on your particular situation one may be better for you financially that the other.