A friend of mine recently asked me how he could improve his credit profile and also get a better rate when he goes to buy a new car. This actually got me thinking as to how many of us know how the banks/lenders function and most importantly how they determine if they grant you credit or not for a house, car, short-term credit, loans etc. Your Payment HistoryAmounts You OweLength of Your Credit HistoryTypes of Credit UsedYour New Credit You can improve your credit scores by taking a close look at your credit reports and charting a plan of action to improve them. Which parts of a credit history are most important? The rate that is given to you by the bank at times depends on your credit profile/history. Your personal credit profile plays a major role in determining the amount that the bank is prepared to lend you when you want to purchase a huge asset like a car or house. The size of the home loan determines the interest rate discount that you will get. Home loans above R1 000 000 usually qualify for a discounted rate i.e. a rate that is less than 8.5%. The cost of money is interest and most of us; we cannot run away from it but we can manage it better. In an ideal world we should be buying our cars and houses for cash. But it is generally impossible for most of us to buy a house worth over R1million for cash. Hence you need a good credit scoring to ensure that you can buy that dream home.