Your credit score is a numerical reflection of the lines of credit available to you as well as the terms that lenders are willing to offer. A high risk credit score means you may have trouble borrowing money from creditors in certain instances. As a result, you will need to take steps to improve your credit score or make alternative arrangements for borrowing money.
The numbers of your credit score will vary based on the credit reporting agency. Some scores range from 500 to 900, while other scores range from 300 to 850. A higher score is always better. Generally, if you are on the lower end of either range, you will be considered a high risk borrower. Your credit score is generally based on your past credit history -- your behavior as a borrower. You're rated on whether you make payments on time, how often you make new credit inquiries, the length of your credit history and the types of credit you use.
Why Credit Scores Matter
Credit scores matter because lenders are not obligated to extend lines of credit. A credit line is generally needed for many essential purposes such as buying or leasing a car, buying a home, taking out a loan or applying for a credit card. Although not necessarily true in all instances, potential employers and landlords may also check your credit score when determining whether to hire you or provide you with a rental agreement.
Improve Your Credit Score
To improve your credit score, begin by checking your credit reports to make sure that all listed information is accurate. Pay all bills on time and settle any delinquent accounts. You should also keep your balances low on existing credit cards and only apply for new lines of credit as needed. Finally, you should pay off all debts as soon as you can and protect yourself from identity theft and credit fraud scams.
If you require a line of credit and you do not have time to raise your credit score, you have some options. Although many lending options exist for high risk individuals through traditional credit channels, these options will likely have bad terms and high interest rates. Consider obtaining a line of credit from a family member, a loan from a micro-loan company or a grant from a government funding source if you're eligible.
Louis Kroeck started writing professionally under the direction of Andrew Samtoy from the "Cleveland Sandwich Board" in 2006. Kroeck is an attorney out of Pittsburgh, Pennsylvania specializing in civil litigation, intellectual property law and entertainment law. He has a B.S from the Pennsylvania State University in information science technology and a J.D. from Case Western Reserve University in Cleveland, Ohio.