Why is a good credit rating so important, and how can people improve their credit ratings?
The main reasons are to borrow money or to seek employment. Obviously lenders look at credit reports and scores in making lending decisions. Employers, more and more, are looking at credit reports as a judge of character in the hiring process. There was a student in the Personal Finance class I guest lecture in at Ohio State who was offered a job and then had it rescinded when HR ran a credit report on him. In a tighter job market it literally can pay to have a better credit report than the next applicant. As far as improving one’s credit, the single most important aspect is to understand what is going on in the credit report. Having an understanding of what is contained in the credit report and what is not, FICO® scores consider five factors in calculating a score: • Payment History: 35% • Balances 30% • Inquiries and New Debt: 10% • Types of Credit: 10% • Length of History: 15% With these set of factors the ideal account would be a credit card that I have always paid on-time (Payment
