FIX CREDIT SCORE
Credit scores are something which if not taken care of, can leave you bankrupt! Credit scores are 3 digit number that relates to how likely you are to repay debts. Banks and lenders use this score to decide if they will approve your credit card or loan or not. There are mainly three credit bureaus – EQUIFAX, EXPERIAN and TRANSUNION- which creates your credit reports after which credit scoring models like VANTAGE SCORE and FICO come up with a score that is basically between 300 – 850. Your scores are typically based on things like how often you make payments on time and how many accounts you have in good standing. Your score will never factor in personal information like your race, gender, religion, marital status or national origin.
Sometimes, when not taken care of, these credit scores may deteriorate too. And therefore it is very essential to keep these scores above the bars. There can be a lot of reasons for these credit scores deterioration, but few can be these :
Increment in credit utilization
Credit utilization means that how much of the credit you use at a given time. The credit utilization percentage can be calculated by dividing the total credit account balance of total credit limits and then multiplying by 100. Well credit utilization is important as it gives an idea to the creditors of how responsibly you use credit.
Missing a payment on one of the credit accounts
Credit scores can be highly be affected by late payments or missed payments. This affects the scores as your score determines how likely you are to pay the money that you owe and if there’s any late or missed payment, that indicates your inefficiency.
Derogatory mark can also lead to low credit scores
These can include Bankruptcies, Foreclosures, Tax liens, civil judgments, etc.
Closing of an old account
Age of the credit history is used to calculate the score, and if you close your old accounts, you’re going to effectively lower the average age of your credit accounts.
As illustrated above, a surprising number of factors may cause your credit scores to drop like credit utilization, derogatory marks or hard inquiries, missing payments, etc.
Firstly, it should be understood that credit reports and credit scores are two different things. A credit report will be basically a credit history listing things like closing and opening of accounts, payment history etc; while credit scores on the other hand, use that credit report information to turn it into a three digit log.
When we are talking about maintaining a proper credit score, we should always keep the following things in our minds.
Pay bills on time.
Always pay the bills. If you are unable to make the full payment at once, be sure to make the minimum payment.
Maintaining the credit card balance.
Make sure you’re not using too much of your available credit.
Do not open new accounts uselessly.
If you apply for new cards too frequently, this may put a bad impression of you on the creditors.
Always inform the bank and card companies if you’ve changed your address or email id.
The bills can go unpaid because the mails won’t be received at the right addresses.
Always check your accounts online.
There’s no reason to wait for the bills to come in the mail. You should make sure payments are cleared and cards are being kept updated.
Pay off felonious bills.
Paying down wrong accounts won’t remove missed payments from your report. But it will make you look better to creditors.
Look for inaccuracies.
It may happen that the information that is with the agencies are incorrect, so always cross check the data they have with them in order to maintain your clean record.
Credit scores are incredibly important as they represent an image of your credit worth in the society and help you to get loan from creditors and banks. In fact, the rate of interest is also decided on your credit scores. So from now on, do pay complete attention to your credit scores and credit history.
Author: Arun Rathi