In many countries around the world, lenders and other institutions
depend upon information about your financial background to
make decisions that, to a smaller or greater extent, affect
your life. In the United States, this information is gathered
by companies called “credit reporting agencies” or “credit
bureaus.” Although many such agencies exist, the three
major agencies are Experian®, Equifax® and TransUnion®.
>Why is it important?
>What is a “credit score”
>An established credit is important for even the basic necessities
>An established credit enables you to make major purchases
>Other benefits of an established credit
>Summary
Why is it important?
In the United States as well as in a growing number of other
countries, your “established credit” is necessary
not only for making major purchases, such as homes and automobiles — it
is often also necessary for even the most basic transactions.
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What is a “Credit Score”?
In addition to the credit report, some U.S. based lenders
use a “credit score” — a number derived from
the information in your credit report that is used to determine
your creditworthiness. The score usually falls between 350
and 850. In general, higher scores reflect a higher degree
of creditworthiness. Keep in mind that when lenders consider
a loan or credit card application, credit scores are not the
only factor they use in making credit decisions.
As part of our underwriting process, UNFCU utilizes a customized
credit scoring system, which takes into account information
about your financial status including your income, your current
monthly obligations and your employment history. This custom
score is just one of the tools that UNFCU uses to make lending
decisions.
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An established credit is important for even
the basic necessities.
In many countries around the world, including the United
States, established credit may be necessary for even the simplest
transactions, such as arranging for utility services — gas,
electricity or telephone — to be connected to your home.
In fact, acquiring an apartment itself may necessitate your
prospective landlord’s performing a credit check on you.
Cellular telephone service providers may wish to review your
credit prior to granting service contracts. In addition, for
example in the U.S., it is becoming a common practice for U.S.
prospective employers to review your credit as part of the
employment application process.
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An established credit enables you to make
major purchases.
An established credit is necessary for purchases too large
to be made with cash. It enables you to finance such items
as new furniture, automobiles, vacations, computers, or a new
home. The status of your credit can significantly influence
lenders’ decisions on the amount you can borrow, and
what interest rates you will be required to pay.
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Other benefits of an established credit
If you, or your children, need assistance in financing higher
education, a good credit will help in your ability to obtain
it. Aspiring entrepreneurs can use their personal credit to
help get a business started via a loan. Finally, insurance
providers — auto, homeowner’s, and renter’s — often
factor in an applicant’s credit to determine rates charged.
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Summary
Your established credit is a thorough record, which —in
case of the U.S. —is kept by three major credit reporting
agencies. Lenders, including UNFCU, frequently utilize these
agencies by requesting your credit report. In many countries
in the world, an “established credit” is vital
to almost every aspect of your financial life, from the most
routine transactions to making the largest of purchases.
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Be sure to read Establishing Your
Credit to find out how to develop yours.
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