Credit rating is not just a means to judge your financial reputation; it is a valuable tool in getting low interest rates with loans and insurance policies. Credit bureaus are the agencies that assess a person’s credit scoring. A few points up or down on the credit scoring could be a very influential deciding factor in getting or being rejected for a loan. A person with a good credit scoring could get a better loan, a better interest rate and lower payments each month. Apart from that, it would also make one eligible to get a credit card, and make the company decide to give more credit on the card.
There are many factors that go in determining a person’s credit score. Some of them are the history of the credit, account transactions, history of the debts, etc. Each of these factors could mean some points on the credit score. The best way to keep a good credit score is to make the payments always on a timely basis. One more way to determine is to see how much credit one person uses, and whether he/she manages to pay it off within the due date or not.
Once you know your credit score, there are ways and means to improve it. The credit score is provided by the bureaus that make it – Experian, Equifax and TransUnion. You are entitled to get one credit report per year free on demand. There are smaller crediting agencies that could give you more credit reports in the year upon charging a small fee. The credit report would reflect the payment history and its period, outstanding debts and types of credit in use among other things. Checking your credit report does not make you lose out on some of the points, but checking too often could make this happen.
It is very important to ascertain that the information mentioned on the credit report is accurate. The credit report is not infallible; there could be minor or even serious errors on it. Any reporting of errors must be done within thirty days of receipt of the report. After this the contention will be verified, and rectified if justified. This right also extends to removal of false negative remarks on the credit report. Once an error has been corrected, it is necessary to check up on it once every year or two to make sure it does not creep in again.
Now comes the time when you must take measures to improve the credit report. Start by paying off all the outstanding dues. This will make appreciable change in your credit ratings. Be sure to pay off all the debts, because some institutions do not help in fixing your ratings even after their debts are paid. Try to pay off the debt before the lender reports it to the credit agency. This will reduce the outstanding debts in your name.
Give up the credit cards that you can do without. Having too many credit cards reflects negatively on the credit report. It is ideal to have four credit cards, and no more. If you are giving up some of your cards, be sure to give up those with which you have a poor record. Do not switch on your credit cards to change the payment rates. This will have adverse effects on the credit scoring.
Pay your bills on time. This is the biggest contributing factor to build up credit rating. Even if you are not able to pay the entire bill, pay at least a part of it, which will show your earnestness in making timely payments.
Establish a credit history if you don’t already have one. If you have credit and are managing it well – by making timely repayments – then it has a very sunny effect on the credit scoring.
Finally, investigate other avenues where you can build up on your credit scoring by talking with your financial counselor. This would help you to get a mortgage in future, which could make you own your desired home or the car of your fantasies.
By: Adam J. Heist