Categorized | Credit Score

Know the secrets of improving credit scores



Although everyone is aware tat they should be familiar with their credit scores, yet, mot of the people in America doesn’t know what impact credit score can have on their financial life. Neither do they know what can make their credit score high. There is a very common idea among the most of the Americans that a good credit score can be earned if the bills are paid at right time. But according to experts, this is an entirely wrong perception. Even if you pay your bills on time your cards might get near to saturation. And when a card reaches a saturation level, then it cannot fetch you a good credit score.

The following advices will help you to know the secrets behind increasing your credit score.

If you want to improve your credit score, than you must clear off your revolving debts first. There are generally two distinct types of loan that we have. The first is installment debt which is guarded by collaterals, for example car loan r home loan. And the second type is revolving debt, which originates from credit card balances. These loans are unsecured and thus FICO or Fair Isaac Corporation marks them as riskier loans in case you don’t pay them off. Naturally, paying off these loans will boost your credit score instantly compared to the repayment of your installment loans.

Many people are driven by the idea that when the payments are made to the collection agencies, it boosts their credit score. But the actual story is much different that this. By the time you have involve a third-party firm for collection of your dues, your primary lender already identifies the loan as a loss and marks you as a defaulter. Although in such an instance you will be guarded against suing but FICO will take the delinquency report as a negative mark in your credit score report.

Similarly, if you are stuck up with insufficient money in you bank and the bank send you notice to terminate your bank account, then, it will cause negative impact on your credit score. The story of bad credit score gathering by FICO doest end here. Your credit score is deters if you have library fines, parking tickets, unpaid loan debt etc.

The way you should not allow any kind of bad report to get published against you, similarly you should also give extra stress to keep the good records on the repot. For instance, if you have paid you car loan on time and have never missed out a single installment, then, it is required to keep this good payment information on your repot.

FICO has its own rules of identify risks. One of the most important of these rules is opening and closing of credit account or loan is risky and thus the respective person’s credit score goes down. Even if it is risky and marked as a negative score, there is a chance that on-time payments will bring back your scores in a suitable level.

But the converse action may not give you a good result eventually. In case you need to close of you credit account then your credit utilization ration gets skewed. In fact experts in the finance and budgeting advices that it is better to use all the credit cards sparingly and occasionally. An unused credit card, which gets cancelled by the issuer, can harm your credit score.

Finally, a tendency in most Americans is to borrow and pay off the old loans. Americans often show an inclination towards consolidation loans. But in fact this can make your financial position riskier than before as most of the consolidation loans are backed by our houses. Any discrepancy in making the payments can cause catastrophic condition for you. Since this is a new loan you will be charged with a negative mark in your credit report.

Paying your bills is not the mantra to earn good scores in your credit report. Rather paying your bills much before you are marked a defaulter is the golden way to gain credit score.

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