A credit score is a parameter that is used to judge the financial situation of a person. Oftentimes it is the most important criteria that the lenders take a glance at to decide if the person is eligible to get a new loan.
The possibility of getting credits, be it in any form, rises significantly if one has a good credit score. The approval process is also a lot easier and faster for these people.
A good credit score can also ensure that good repayment terms like payment tenure and rate of interest are made available to the person.
However, maintaining a good credit score can become a little difficult from time to time, which can be achieved by following some simple steps that we intend to explore in this section.
Reviewing the credit report:
It is a good idea to get a credit report at least once a year and have a review of it to understand what factors might be affecting the credit score so that they can be sorted before it is late.
Some of the potential factors that can cause a weak credit score are low credit card limits, missed payment of installments, and holding too many loan and credit accounts.
Having a good payment history:
Payment history is one of the key factors lenders look at while determining the creditworthiness of an individual. It is always advisable to pay off debts, regardless of as minimal or as old they might be. One should also try to avoid late payments of any installments.
Ways to avoid late payment of installments can be auto payment of bills from a bank account or activating alerts for the due date of the payments.
Using less of the credit limit:
It is another strategy that can help in the long run for maintaining good credit, one should aim for utilizing only 30% or less of his available credit limit on the credit cards or credit lines.
Ideally, one should opt for using only 10% of the credit limit or request the credit card company for an increase in the credit limit to maintain a healthy credit limit and expenditure ratio.
Cutting down on new loans and credits:
New loans and credits can adversely affect the credit score of a person. Hence it is advisable to cut them out as much as possible and instead maintain the old credit cards and pay off the old debts.
Managing the old credit accounts:
Although the common temptation might be to close down any older account that is no more being used, it is advisable to maintain them as they can be a part of the credit history.
And having an old credit account and history increases the eligibility criteria of the person to avail of new credits.
Consolidation of debts:
Debt consolidation is a good way to influence the credit score and make it better. However, having a number of outstanding debts is not good for credit score, and it is better to opt for a loan from banks, credit unions, or other lenders to pay off and consolidate the debts.
It is always a good idea to keep monitoring the credit record and history from time to time and address any issue that is impacting the credit score.
Maintaining a good credit score is absolutely important as it can be a saviour in times of emergency while applying for emergency funds and loans.
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