YOUR CREDIT SCORE IS MORE IMPORTANT THAN YOU THINK
It is known facts that, buying your own home or car or going to college on your own or even sending your kid to college are important milestones in a person's life. More often than not people need the assistance of an additional monetary back up to achieve these milestones. This monetary aid almost always comes from a loan.
Now getting a loan from either a money lender, or a bank or other finance firms may vary in procedure. But thing that almost all loan related firms will ask for is your credit score.
A credit score is basically a number that is derived after evaluating your financial management over the years. It determines how soon and how well will you be able to pay your loan back to the lender. So a credit score basically tells the lender how much risk they stand when they give you a loan.
A good credit score means the relative risk is lower, and more lenders would be willing to offer you a loan. Likewise a poor credit score could mean fewer firms will want to take the risk.
What are the factors that affect credit score?
We as a firm make use of a fairly standard method for the evaluation of the credit score. Additionally, if needed we can also hand you a copy of the score for your reference. While the there is no scope for error in the evaluation, in case there are any incorrect reflections of your financial numbers, the same can be rectified.
The main factors that play a role in the evaluation of the credit score are as follows:
The history and Pattern of your payments: This is the first and most crucial factors that play a huge role in your overall credit score. If you have been regular with your payments this will reflect well on credit score. Then if you have missed payments, have been late with your bill payments on a regular basis, you appear to be a risk for the lenders. This invariably affects badly on your credit score.
Rate of credit use: When you have a credit utilization of under 30% you will be seen as a low risk person. Credit utilization rate would mean the credit limit you have on your credit card balance and how much of the limit are you actually using. When you are using far lesser than your limit, it speaks well on your overall credit score.
The number of accounts you have: This is yet another factor that plays an important role. There are many credit score evaluation models that take this into account. Here what is preferable is to have accounts with zero balances rather than having accounts that carry a balance on them.
The credit use history: This is a factor that is taken into consideration while calculating a credit score is because it is how you behaved in the past that will give an insight to the future. How long you have been having a credit balance, including all the accounts that have been used for it. How well these credits were handled and at what age you started this, all are taken into account.
Credit Mix: Many credit score models use this while accounting for a credit score. It depends on the different types of credits you use. How many instalments do you pay and how much are those instalments worth.
Too many Hard inquiries: There are some models that take your inquires with other money lenders into consideration. More the inquiries lesser is the score. However, there are many others who believe this to be erroneous, as it is now a fairly regular practise to compare loans before opting for one.
More poor feedback about your finances check their Facebook page have an adverse effect on your credit score. When there is information regarding collection accounts, filing for bankruptcy, charge offs, tax liens, accounts that have reached the civil court and many such negative information do not work in your favor. Sadly, what has been done cannot be changed, but there are many ways in which you can make amendments and take efforts in improving your credit score. Pay bills on time: When you get bills, make sure they are all paid well beforehand. Avoid delaying or paying additional late fees. Attempt to pay off debts: While we understand that it is not possible to pay off debts that have accumulated over a period of time almost immediately. But shifting these loans or putting them together does not help the cause. Even if this means cutting off a few additional expenses, make an endeavours to pay off some of the debt little by little. Apply for open credit accounts only when you need them: Simply opening accounts to create a mixed credit feeling does not help. We can see through it. When there is a genuine effort taken to improve the credit score, that effort is always duly noticed and appreciated by us.