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In several countries, credit history (also known as credit rating or credit score) is a signal of a person's previous repayments and debts. The score signals the time when certain loans were made and the time when the same are eliminated. It also gives info as to the person's lateness when it comes to payments, or if he couldn't pay due to a bankruptcy filing.

A credit bureau takes down this information; and credit card companies or financing companies may look into this record so they can verify the worthiness of a borrower, or in some cases a company, to settle debts. Lenders base this decision on the credit reputation of the borrower when it comes to paying monetary obligations. The borrower's credit worthiness also dictates the possible Annual Percentage Rate (APR) that lenders may charge him for giving him a loan.

A person's credit score is a number that represents that person's credit worthiness. In most cases, a credit score of 650 or higher is good. Anything over 750 is considered very good credit. A borrower is considered very risky by lenders if he has a bad credit score. A bad credit rating reduces a borrower's shot of getting loans, and if he does get a loan, it wouldn't be the best terms (e.g., very high interest rates). Therefore, in this situation, before applying for credit, it might be beneficial to learn how to improve credit score

Let's discuss issues relating to credit score computation. Although different countries have separate ways of ascertaining a person's credit rating, they consider similar factors, such as:

The person's delinquency. If the person is often delinquent, then it will cause the re-aging or the issuance of a new credit history because he/she chronically fails to pay his debts on the time specified. Paying on time is one way to improve bad credit score.

The person's conscientiousness and constancy Indications showing the person's sense of responsibility is one of the things that the lender will look out for. The length of his stay with an employer is one indicator. Other signs include the individual's ability to pay his bills and whether the payment is on time.

The individual's self-control. The lenders will usually entertain the borrowers who demonstrate that they can handle their finances properly. Thus, a individual should demonstrate that he is living within the limits of his/her budget. If the lender finds out that the individual normally exceeds his limits, then the latter's credit rating decreases.

Inquiries made into the person's credit. If it is demonstrated that many of the inquiries on the person's credit were made by lenders, it might cause a decrease on the borrower's credit rating. Several hard inquiries on that account may show that the individual has looked for loans many times already.

Now, let's talk about obtaining a credit report for free. In the United States, there are 3 credit reporting agencies that give an individual a free credit report annually. These companies are Equifax, Experian and TransUnion. Their service is available online at the site, www.annualcreditreport.com. You can get a copy of your credit report from the three credit reporting agencies with no cost at least once every year. It is a good idea to check your credit history every 4 months or so to make sure the info in your credit record is right.