A personal credit rating is basically the same as the credit score of an individual. The term “personal” is simply tacked on as an adjective in order to make the distinction from business credit. A personal credit rating is calculated by credit bureaus, which collect all the available financial data of individuals. This data is then compiled and analyzed, the result of which is the personal credit rating, or credit score.
The most commonly utilized method to denote one’s credit score is the Fair Isaac Corporation (FICO) method. The FICO score is a 3-digit number which ranges from 300 to 850. The lower one’s credit score is, the harder it is to get approved for loans and other financial products. A lower credit score also implies less desirable applicable terms and rates.
How do you ensure that you have a good personal credit rating? There are many things that are taken into consideration when the credit rating is calculated.
Some of these are:
- Payment history - this includes whether or not you have made late payments or you have missed a payment entirely.
- Outstanding debt or credit card balances
- Filing for bankruptcy
- Kinds of credit available
- Length of credit history
Consumers ought to remember that in most modern societies, the personal credit rating is an essential element. In many cases, an individual will not be able to get a decent financial product if his credit score goes below a certain number. While there is no fixed threshold in this regard, the general rule is to pull up your personal credit rating as close to 850 as possible.