What is my Credit Rating?

Individual Credit Ratings of a person is generally calculated by Credit Bureaus (in US) and Credit Reference Agencies (UK). In US the major Credit Bureaus are Experian, Equifax, TransUnion and Innovis. In UK the major Credit Reference Agencies are Experian, Equifax, and Callcredit. However in different countries different personal credit rating systems exist.
 

The term Credit Rating was first used by Fair Isaac Corporation, an independent financial service company, in the year 1950. Their are various factors which may influence the Individual Credit Ratings like the ability of a person to pay a loan on time, interest paid, amount of credit used, his or her saving patterns, spending patterns and debts, etc.

The application of the Credit Rating mainly includes borrowing of credits at a low rate which in turn increases the investments and thus efficiency of the market. Individual Credit Rating is also been used by banks and investors in opening account, broker-dealers and government organizations. The other uses of Credit Rating are to adjust insurance premiums, determine employment eligibility and establish the amount of a utility or leasing deposit.

So one must always try to maintain the good Credit Rating as it helps in obtaining any type of credit easily and at a lower interest rate. Whereas a bad or poor Credit Rating indicates a high risk of defaulting on a loan and thus leads to high interest rates, or the refusal of a loan by the creditor.

Some important points regarding the Individual Credit Ratings are mentioned below: -
(a) Always pay the credits or loans on time to maintain a good credit rating.
(b) According to the Fair Issac Corporation the Credit Ratings (FICO Scores) is calculated from 300 to 850. A Credit Score of above 725.66 is considered good and a Credit Score of below 600 is considered to be bad.
(c) According to the Fair Credit Reporting Act, it is now easy to obtain a free online Credit Report once every 12 months.
(d) The effect of loan modification on the Credit Rating will depend on the negotiated terms and reporting by lender to the Credit Bureaus.
(e) Any type of negative report will remain on the Credit Report for 7 years of time.
(f) Apply for the Credit only if you really need it.
(g) Credit Report is updated regularly which than results in updating of Credit Ratings.
(h) Checking of Credit Rating will tends to limit any type of ID Fraud.
(i) The number of Inquiries made for Credit Report makes up only 10% criteria for credit score adjustments depending on the type of Inquiry i.e. soft inquiry or hard inquiry.