By Sarah Williams
Credit cards make buying things a lot easier with its buy now, pay later policy. But, not everyone can easily acquire a credit card. Everyone has to have their credit profile checked, while financial institutions determine a person’s credit score and whether or not he or she is qualified to get new credit cards or loans.
The credit score is a person’s credit profile: therefore, it can also affect a person’s life directly when renting houses or purchasing cars and even finding a job. So, to avoid getting entangled with credit score issues, here are facts that people need to know about credit profiles and credit scores.
What Are Credit Profiles For?
People who have existing loans, bills, and credit cards automatically have credit profiles. The existence of the credit profile began in 1970 when the United States Congress passed the Fair Credit Reporting Act enabling financial institutions to standardise credit reporting. The act made information sharing between creditors easier and protects consumers.
Whatever the present credit score of the person is, it will affect his or her credit profile in the future. For instance, with the help of the Fair Credit Reporting Act, the person’s credit profile can show a lender if a person can pay its bills on time, and how much they will be taking monthly. Credit scores and credit profiles are somewhat a testament to a person’s financial responsibility.
Usually, credit scores and credit profiles are available at AnnualCreditReport.com, and each person is entitled to have access to their credit scores. There are three major national credit bureaus, namely: TransUnion, Experian, and Equifax, and because of this, people receive three versions of their credit profiles.
Credit Scores and the Important Components of a Credit Profile
According to CreditCard.com, payment history is a critical component in the accumulation of credit scores. A person should, at least, pay the minimum amount each month to maintain a good credit profile, and should contact their credit card provider in cases of emergency.
It is also important for credit cardholders to be mindful of how much they charge. This will prevent confusion from how much a person owes to how much credit is still available. According to the website, the actual rule for maintaining a good credit score is spending less.
The most important aspect to take into consideration is the capability of paying for the existing credit. Applying for too many credit accounts will make a person look like an impulsive borrower and dependent on credit and loans. Being informed with how credit scores work will be of great help in understanding how the industry works. Also, with the advent of the Internet, it is already easy to find sources that can assist in providing specific information on credit scores and monitor credit health.
Credit scores quantify the payment history of a person depending on the information given on his or her credit report. As mentioned above, the credit score increases the more a person uses his or her credit and pays for it on time.
However, there will be instances that the credit report encounters mistakes. This is why each credit lender strictly follows their standards for good scores to avoid confusion. Universally speaking, a credit score of 720 and above is what is considered a good score.