Two people making the same income, walk into the same bank, wanting the same amount for personal loans. While they both get the loans they were seeking, one gets a much better interest rate and thus gets a much better deal.
Why Do Some People Get Better Rates Than Others?
First, there is no law saying how much of an interest rate a bank can charge (except for military personnel.) This means the bank can determine how much and at what interest rate they are willing to offer a personal loan. In most cases, the better rates and the better terms go to those with the better credit score.
How to Improve Your Credit Score
Since your credit score does more than determine the interest rates on personal loans, it is important to do everything you can to keep that score high. People use your credit score to determine job eligibility, insurance premiums, interest rates, availability of personal loans, and so much more. Here are some things you can do to either raise your score or keep it high.
Pay Hospital Bills – Many people are unaware that as long as you pay part of your bill you are ok. Therefore, every month pay something on all your medical bills.
Only have 1 or 2 Credit Cards – Revolving credit is a tricky thing. On the one hand, you need some revolving credit to get a credit score. However, too many credit cards or too many request for credit cards can lower your score.
Keep Balances Low – Paying off your credit cards each month is ideal. If you must roll over a balance, then pay it off as soon as possible. You need to keep a low debt to income ratio.
Pay off Bad Debt – Many people believe that once a debt goes bad, there is nothing you can do. However, paying off charge offs and slow pays will still be better than nothing.
Pay off the Low Debt – Small debts like $20 or $30 can have a huge negative impact on your credit. Check your credit report and pay off these little debts to get them off your record.
Negotiate Large Debt – Even after a debt has gone to collections or been written off, you can call and try to negotiate a smaller fee. You may be surprised to find the creditor is willing to settle for pennies on the dollar.
The best thing you can do about your credit score is to watch it. Take advantage of the free yearly credit card report to keep the right information on and faulty credit information off.