Surprisingly, many people are unaware of their credit scores and how they affect their access to borrowed funds. Most lending institutions make use of credit reports in determining whether or not an individual will receive a loan and, if the loan is made, the borrowing terms he or she will receive. Being aware of what constitutes your credit report can help you enhance your score and ensure you receive the best available terms from your lender.
Three major credit reporting agencies, Equifax, Experian, and TransUnion, collect information reported by various financial institutions (credit card companies, banks, etc.) to produce a credit report. Credit scores range from approximately 350-850 with the most credit-worthy borrowers receiving scores above 750. Your score is affected by such factors as payment history (e.g., late payments), amounts owed, length of credit history, and number of credit accounts. Public information such as lawsuits and bankruptcy can also negatively affect your score and can stay on your report for seven to ten years.
Fair or not, a complicated formula of these factors condenses your entire financial history into a single number which lenders use in making their loan decisions. A low score could result in a high interest rate on your mortgage through secondary market lenders such as Freddie Mac and Fannie Mae, or it could limit the borrowing capacity of your small business.
What is the best way to enhance your score? The most simple and effective way to increase your credit score is to always make your payments on time.
Whether it’s the mortgage on your house or the line of credit for your business, making payments on time will keep you in good standing with your lending institution.
As mandated under the Fair Credit Reporting Act, you can keep an eye on your credit score by requesting a free annual report from each of the major credit reporting agencies at annualcreditreport.com. In some cases, a late payment could be mistakenly reported, or an unpaid medical bill could be dragging down your score.
By keeping track of your credit score and making sound credit decisions, you will ensure that you receive the best terms from your lender.
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First Bank & Trust Company, one of the top community banks in the United States, is a diversified financial services firm with office locations in southwest Virginia – serving Blacksburg, Christiansburg and surrounding areas – northeast Tennessee, and the New River Valley and Shenandoah Valley of Virginia. Financial objectives are addressed by offering free checking products for personal and business accounts, and assessing lending solutions managed by mortgage, agricultural and commercial lending divisions. Comprehensive financial solutions are available through trust and brokerage service representatives. For businesses, First Bank & Trust specializes in business services, including online banking and online billpay, andbusiness loans.