This information can easily be found out, usually for a small charge by contacting a local credit bureau or agency that operates in the borrower’s country where the credit was given.

Three main credit agencies for the western world include Experian, Trans Union and Equifax. Credit rating type, scale of rating and the algorithm used to create a persons credit score may vary between region.

A credit score can be instantly granted by registering on one of the above (or relevant equivalent) agencies websites. If details cannot be provided instantly over the Internet then the company may send a copy of your report by postal mail.

The credit report will show an overall rating for the individual as well as broken down separate entries for existing credit information as well as credit that has been applied for, whether a successful application or not.

In addition there are many websites (though often with ‘estimate’ credit ratings) that give a rough prediction of someone’s credit rating based on a series of questions. One example can be found at msn.com here (please note that this uses US credit rating criteria):

http://articles.moneycentral.msn.com/Banking/your-credit-score.aspx

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Credit ratings are applied by credit bureaus and agencies such as Experian. By collecting data from a person’s credit history, an estimated rating is applied from judging how that person has behaved in maintaining previous credit accounts and from other personal data.

Maintaining a good credit score is becoming more important as time goes by. Traditionally the data was used by a prospective lender in order to help determine whether offering credit was a risky proposition, Nowadays, however entities such as insurance companies and even employers are looking at credit scores and credit history.

A few problems arise when trying to obtain a good credit score. Firstly, no credit agency fully reveals how the ratings are calculated and secondly, there are many difference credit scoring models throughout different areas of the world and even within the same countries and counties. Different creditors look for different factors and this makes improving a credit score difficult. Though it is not an exact science, there are many generally accepted methods to improve credit ratings overall. It is important to obtain a higher rating as possible in order to improve the chances of obtaining credit for the future, whether it be for a mobile phone contract or a mortgage.

As already mentioned above, formulas for a good credit score vary, however some basic criteria outlined below can be very beneficial to a good credit score:

• Solid payment history
• A mixture of credit types
• A low level of recent credit applications
• The percentage of available credit a person is currently using
• The length of a person’s credit history

The first step of obtaining a good credit score is to find out the exact state of a person’s existing credit rating. This will give good insight into whether a future application may be accepted or if the same application will be declined, reducing the credit score even further.

With world society counting on credit more all the time, it is important to maintain a good credit score should it be needed in the future for any product or service. Furthermore with businesses such as utility companies and employers viewing people’s credit score, it can only be beneficial to gain a positive credit rating or even improve on an existing credit score.

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However the credit score will likely be used to determine the level of risk of a borrower and therefore the rate of interest that may be borrowed at. The lowest rates of interest are offered to those with the best credit scores, while those with low credit scores receive the worst offers with high interest and higher monthly repayments for the same value of mortgage. In addition to this however, lenders will take the amount of a down payment or deposit into consideration. This can affect the level of interest on the mortgage in a similar fashion the credit score as outlined above.

Even though there is no real minimum credit score level that is required to obtain a mortgage, borrowers that are high risk propositions in the eyes of a lender with low credit scores, will be subject to increased up-front fees in order to be approved at all. The likelihood is high that a larger percentage down payment would be required for lower bracket credit score applicants in addition to high rates of interest. The result of Subprime lending can mean crippling repayments whereby the applicant is forced to decline their own application due to the high costs involved.

However, rates, fees, terms and conditions and other aspects of credit vary greatly from country to country, lender to lender. Generally speaking across the board, higher risk always means higher cost.

It is always worth finding up to date information on a credit file if thinking of applying for a mortgage in order to gauge a rough idea of what interest will be paid locally. In addition to this by checking errors on credit history, removing out of date entries may increase the overall credit score which could have a positive effect on the mortgage offers received.

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To find out what is considered to be a ‘good’ credit score firstly depends on where in the world you are situated. In some countries like the US, UK and Australia Experian are among the most popular of credit agencies that issue credit reports to the population. Experian have their own set of rules and their credit report for the same person may yield a different result when compared to another credit agency such as Equifax. Please also note that actual ratings may be different too.

This makes determining exactly what a good credit score is. However a general idea of a person’s credit score can easily be manipulated from data from credit agencies in any region or country. All bureaus use a mathematical formula or algorithm to give an individual their rating; this is usually in the form of a simple number by using a sliding scale which may run from 300 (bad) to 850 (excellent) for example.

Simply put, by earning a high number or relative score in a particular area, the better someone’s credit score is. The ability to obtain high volumes of credit at the best rates of interest are given to those with good credit scores. So a person in the top 20% of a credit agencies rating are considered low risk with excellent credit scores. The top 40% would be considered with a good credit score, top 60% average credit, top 80% would have a poor rating and the last 20% with a very poor rating.

The further down the pecking order a person is with their rating, the less chance they will have of obtaining credit and if they did the higher interest they would pay. It is worth noting however that different lenders use different formulas to determine whether to accept an application or not. Therefore, if one application is declined, another lender may accept it even though the person’s rating is the same.

Some credit bureaus use numerical figures to assign a credit rating and others use alphabetical grades and some both. Either way the higher the number or letter grade, the higher a person is considered to have a good credit score.

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A person’s credit score and the range that it is part of are calculated by credit bureaus by unique mathematical formulas and further data algorithms which are not made public.

Not everything is as linear as it may seem when it comes to exactly what a good credit score is. This is simply because there are many credit rating systems on the market all of which provide different scales. Further confusion arises when credit scores are looked at around the world with some agencies using alphabetical scores instead of numerical, other agencies use a combination of the two. Furthermore, individual credit lenders may use their own set of criteria to determine an individual’s risk assessment. It is because of this that a good credit score and a good credit score range is dependant on the scoring system of a particular credit bureau or lender.

Lenders that use alphabetical ranges often have a scale from ‘A to H’ (though this of course varies between lender). ‘A’ is the lowest risk category and highest credit score and ‘H’ represents a high risk client with low credit ratings.

Once a person’s credit report has been received and the credit score is determined, it is in that person’s interest to try and increase their score by various tasks in order to move it into a more favourable area of the credit score range. This in turn will allow for more successful credit applications as well as lower rates of interest on that credit.

To show the effect of financial benefit on a sliding scale of people with differing credit scores is the table below. This is using the FICO credit score with an example of a 30 year mortgage interest rate for a $300,000 mortgage.

Fico Score APR Monthly Payment
760-850 4.994% $1,609
700-759 5.216% $1,650
680-699 5.393% $1,683
660-679 5.607% $1,724
640-659 6.037% $1,806
620-639 6.583% $1,913

Generally speaking and by taking all information from credit bureaus and agencies from many countries into account; individuals placed in the top 20% of a credit score range have overall ‘excellent’ credit ratings and history, if placed in the top 40% to 20% then that is considered to be a ‘good’ credit score range.

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Below is a guide to help achieve this. By following these steps, over time, a person’s credit score will be improved without fail. It is important to realise however, that credit scores are not updated daily by the credit bureaus and any changes made to a person’s credit history may take at least thirty days to be amended. Patience is the key to fixing credit scores.

• Review the credit report and ensure that there are no irrelevant entries that are negatively affecting the credit score. These may be old loan agreements that have been paid, wrong data such as the amount of a credit limit or even somebody else’s data mixed up with another’s. The credit bureaus need to be made aware of these to remove them from the credit file. This may increase a credit score quickly and is a simple process;
• Ensure that on credit agreements with a maximum expenditure limit such as a credit card that the balance remains below 30% of the total credit available. Credit bureaus use the balance to help determine credit worthiness;
• Ensure payments are made on time and in full for all credit agreements. Even one or two late payments can have a big impact on a credit score;
• The following have the most negative effect on credit scores, they are in order of importance and should one still be on file when it can be removed – request it to be removed immediately; bankruptcy, foreclosure, repossession, loan defaults, court judgements, collections, past overdue payments, late repayments, credit rejections, credit enquiries;
• If an individual has little or no credit, applying for more credit products will help build a better credit history. Therefore credit ratings will improve if these accounts are kept in good standing;
• Ensure repayments are made on time by setting up a direct bank payment from a bank account. If there are available funds in the bank account, late repayment defaults will be avoided altogether;
• Use a credit card regularly. If little history is built up credit scores will not improve. The best idea is to use a credit card for a small purchase and then pay off the balance in full each month;
• Do not apply for too many credit applications in a small period of time. Each application will be noted on the credit file and will act in a negative manner;
• Avoid too many credit card balance transfers, these may save a person money, however they will negatively affect a credit score;
• Ensure that the individual is registered to vote at a certain address;
• If possible try not to change address or job frequently;

It is important to realise that credit cannot be repaired if a person’s finances are in a negative state. If bills and repayments re still being missed then credit scores will not improve no matter whatever other action is being taken. Repairing credit history takes a considerable amount of time, so patience is required.

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As a general rule of thumb, a credit score of 600 is just 40 points below a level at which a mortgage may be offered without a down payment or deposit. If this is an important factor in deciding to apply for a mortgage, it may be possible to relatively quickly increase the credit score to that level in order to receive that benefit. This can be done by keeping good credit control over lenders agreements such as not falling into arrears, keeping credit balances at 30% of the total available and removing out of date entries that may be on the credit history file.

Should a mortgage be required quickly or the above steps cannot be followed in time, a borrower with a score of 600 will still likely be accepted by most lenders even considering the above average risk they present. The conditions of the mortgage would be less favourable to that of a conventional agreement and the interest rates, fees and down payments would reflect this by being more costly.

This level of credit score falls on the borderline of standard lending and Subprime lending, which means mortgage rates may vary greatly from lender to lender. For one creditor the borrower may be just above the required level for a mortgage offer outside the cut-off point for Subprime lending conditions, according to their own credit policies. For a second creditor the borrower may be slightly under the required level to obtain a standard policy and fall into the Subprime bracket. Therefore different applications made by the same person with the same credit score may differ enormously, the difference of which could result in monthly payments being hundreds of units higher per month for the same size mortgage.

It is especially worth ‘shopping around’ for a mortgage if a credit score is reflected at 600.

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The better someone’s credit rating is with one of the main credit bureaus, the better off that person will be with existing and future credit applications for loans, credit cards, mortgages, insurance, employment and all other area’s of credit life.

Unless an individual is one of the few that has a perfect credit score (which is usually a numerical value of 850 from the major credit agencies), it is always worth trying to improve the score further to access better rates of interest on credit and more successful applications.

Here we look at a few methods in order to achieve that:

• It is impossible to mend or improve credit scores if finances are still in a negative position. If a person is unable to pay bills and repayments are being missed, credit ratings will be worsened. This will only be reversible once arrears have been met and accounts are up to date;
• If a person has little or no credit, it is possible that person will not even generate a credit score at all due to the low level of credit activity. To improve (or gain a credit score in the first place!) a credit score, more types of credit need to be issued to the individual and the accounts kept in good stead for an increase in credit score to be applied;
• Be patient. Credit scores are not updated daily, or even weekly. Sometimes certain entries on a person’s report will not be updated until the individual in question requests it from a credit bureau. If significant amounts of a credit balance have been paid off however, then this is likely to be reflected on a credit score within about 30 days;
• After obtaining a credit report, check every entry of the credit history to ensure that there are no old and out of date entries that could be removed but are in fact having a negative effect on the credit score. This could be a loan that has been paid off for example which is still showing ‘balance outstanding’ on the report;
• Request a major credit card from one of the major credit card companies. Applying for a Visa, MasterCard, American Express or Discover card and using it sensibly by keeping payments up to date can be the difference of moving from the 600 credit score range to the 700 plus range. If the application is declined, consider applying for a secured card, whereby the perfect use of the card could result in obtaining one of the major companies cards within a year or two;
• To stop the risk of late repayments which may harm someone’s credit score, consider arranging automatic payments from a bank account. This will ensure that deductions will never occur on the credit history for late repayments on a credit agreement;
• Try and avoid disputes going to collections or similar departments. This on its own can have a very negative affect on a credit score;
• When trying to build credit score – try and only use a maximum of 30% of the available credit at any one time if possible. Often it is the balance owed to a lender that is used as the data collected from a credit bureau which ends up on a person’s credit history;
• Make sure credit cards are used. Even though using too much of the available credit is negative for building a credit score, so is not using them regularly enough. Try and place small charges to credit cards once a month and of course repay the balance on time;

Do not apply for too much credit at any one time. All applications for any credit end’s up as credit history on a credits report and has a negative effect.

Please note that the lower a credit score, the longer it will take to improve up the credit bureau scale. However it is possible for a person to move from a 350 level to a 750 level, it is only time and the user’s credit history that is the deciding factor.

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By learning how to raise credit score and ratings, it can help with obtaining loans, credit cards and other products and services that require a credit check on an individual or business. Similarly, even if a credit rating is in good health, it can be wise to improve further that rating. This may result in obtaining larger amounts of credit for a mortgage for example, or lower interest rates on existing or renewable products.

Firstly, it is important to know what existing credit rating is. Governing organisations are found in all countries where any person’s credit rating may be applied for. Most countries have different rating scales and ranges that are recorded by credit bureaus; however all of these refer to the same thing – the overall risk to a lender in offering credit to an individual. Usually the lower a person’s rating, the less chance of obtaining credit, or credit offered will be with a high level of interest. The higher the rating means the higher the chance of obtaining credit with lower interest rates.

To raise a credit score, start a history of credit rating or to repair existing credit ratings, the following actions may be useful:

• Up to date payments – By paying off instalment loans for mortgages, cars and other products on a regular basis can help raise a credit score. However over-paying minimum amounts set by the lender will also increase a person’s credit.
• Keep credit low – By keeping a credit balance lower than 35% of the available credit offered is good for credit ratings.
• Use credit cards less frequently – Simply by adding large balances to a person’s credit, can harm credit scores even if the balances are paid off in full on a regular basis. Try and use store and credit cards as lightly as possible as balances are recorded by credit bureaus not the amount that is paid off.
• Do not go over a credit limit – Ensure that credit limits are not breached. Negative credit ratings are applied should a person go over an agreed credit limit set by the lender and customer.
• Use or dispose of docile credit products – If a credit card or store card for example is old and not been used for a period of time, issuers may stop updating information to credit bureaus and credit scoring will not be given for them. It is best to use these as a minimum or cancel them altogether.
• Update your credit ratings – A credit report for a particular individual may include many entries that are out of date and now irrelevant. Though a loan may have been paid off in full, the person’s credit report may not reflect this as they can take time to update or the lender has not made the fact aware to a credit agency. Ensure that a particular credit report is free from late payment charges, credit limits being reported that are lower than they really are, listed payments as ‘unpaid’ that were included in a bankruptcy, accounts listed as ‘settled’, ‘paid off’ or ‘current’ are correctly quoted and old items that are older than six or seven years that should automatically be removed.
• Do not apply for too much credit – if a person already has plenty of credit, applying for more is usually not a good option

The above examples are generally advantageous for credit ratings around the world.

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A person has two options to do this. Firstly, use one of many credit repair law firms to act on a client’s behalf to improve credit ratings or secondly, repair the credit history themselves.

Repairing bad credit history is a lengthy process though it is also quite simple. In order to improve a credit file, existing finances must be in good order. It is impossible to improve a credit score if repayments are currently being missed.

By requesting a credit report from a bureau such as Experian or Equifax, the full breakdown of a person’s credit history can be seen. This will include entries for all existing credit products and also for any credit applications made in the past and possibly old entries from credit that may be from closed accounts.

The first port of call should be to remove any old and out of date entries from past credit. This could be from a loan for example that has now been paid off but is still showing as not complete on the credit history. The credit bureau must be made aware of such entries and this may need to be done by requesting the lender updates the credit bureau stating so. In addition it is not uncommon that fraudulent activity has resulted in two people’s data being merged onto one credit file. Again if this is the case the credit bureaus must be notified to make amendments. It may take such amendments a month or two to be updated but by doing this the credit history will be improved resulting in a better credit score and credit worthiness for that individual.

To repair bad credit further, it is a necessity to act responsibly toward a lender. In other words the account must be kept in good standing. Examples of this include not being late on a repayment, not exceeding credit limits and only using about 30% of the available credit. If accounts are kept in line with the lenders agreements, credit will be repaired naturally and therefore credit scores for that person will be improved over time.

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