Credit Rating Agencies

Nobody gets overly excited about dealing with credit rating agencies, giving them little to no thought and when you finally had the need for them, you suddenly become aware of just how important they are and just how important what they have to say about you is and how it can affect your life. Getting a loan, buying a house, and making any crucial financial decision all have a tie to the services offered by credit rating agencies and credit reporting agencies. These agencies work by assigning people with credit ratings and issuing other types of indicators regarding their debt and financial status. Often credit scores or ratings are discerned by these agencies and will later be used as a reference point by companies, governments, and other non-profit organizations. It is a useful, necessary tool for anyone looking to make a financial decision about you, but that certainly doesn’t make them any less stressful from the point of view of the person having to get a credit score good enough to get a loan.

Credit Rating Agencies – from their perspective

From a lenders perspective, helping out the little guy starting a business, buying a home, or getting a loan for whatever reason, is quite a risky business. Everyone has been burned by lending money and whether it’s only $20 to $30 or if it’s $50,000, you remember it. When you are looking at the scale from how much a $20 loss can ruin your day, just imagine the risk that banks and lending institutions take when they loan hundreds of thousands of dollars to people investing in homes or businesses. All of a sudden the burn possibilities are much higher and more intense. That is why credit rating agencies are there, to provide some sort safety measure for these lenders.

Much like how credit reporting agencies will verify financial statements of a company; these companies are not directly liable for the accuracy of the documents. What they do is offer an indicator, allowing the lender to make an educated guess about a borrower’s financial habits. By knowing the types of credit you have as someone looking for a loan, the inquiries that have been made regarding your accounts, as well as your debts, current and from the past, as well as your ability to pay them and the salary that you make, lenders have a better picture your financial stability. There are many parameters that the credit rating agencies will look at, and many of them you have access to as well, like the information listed above. Sometimes they’ll take into account what assets you might own (such as cars or property) and equity as well. It varies from report to report but you should be able to have some idea as to what your credit score is, based on how you handle your finances.

One important thing to remember if you are going to meet with credit rating agencies is that they are based on your long term finances. This means that if you are trying to raise your credit score and have the credit reporting agencies show your score as higher, you’ll want to get whatever loans you have in order and pay them off as soon as possible. Paying off, or at the very least, paying down your credit cards, car payments, and house payments can all help boost your credit rating.