Credit score is mark of your affordability to repay your debts/loans. The computer collates lots of information about one’s credit history and generates a number. This number is labeled as credit score.
Your credit score represents your trustworthiness and credibility to the lenders in financial market. If you have a good performance in credit (score 760-850) then lenders will be eager to offer you the best loan packages at competitive rates (6-6.5%), knowing that they are not risking their investment. But if you do not have a near perfect score (620-650) you often find disapproved for loans that you have applied for or acquire them at much higher rates (7-8%). The same is true even for debt consolidation companies.
Many debt solution agencies will offer you their best debt consolidation loans at attractive rates only if you have an excellent credit report. For bad credit you are eligible for products that bear very high rates of interest with strict payment schedules.
You can save money by improving your credit score. Actually your credit score decides how much you will have to pay for life insurance premium, interest on mortgage, motor insurance, credit card and much more. Even credit score is the determining factor in whether you will get the job you have been aspiring for.
When you are in under a huge debt burden and missing out your deadlines on loan repayments your creditors mark you as a defaulter. You lose your integrity as a potential borrower and enter in the “bad books” of credit bureaus. Now suppose you have opted for a loan that consolidates all your existing loans into one payment. By making this move you continue to repay this loan on time and follow up regularly with your debt consolidation agency on your score.
Your debt consolidation agency is responsible to report this repayment to the credit bureaus. While initially you might find a drop in the credit score due to your previous outstanding bills, your credit score slowly increases with this effort of timely repayment continued on your part.
So the fastest way to boost your credit score is by paying your bills on time and reducing the debt amount. You can ask for a free copy of your credit report every 12 months from all the 3 bureaus where your credit performance is reported. Knowing your credit score and checking for mistakes if any would also help you to plan for your finances in future.