At one point in time, one may require some form of credit to achieve their dreams. This could be a mortgage to buy a house, an auto loan, a credit card among other sources of credit. People go for credit as a source of funding due to liquidity challenges they may be experiencing. With the advancement of technology, there are databanks which contain people payment records i.e. utility payments, loan repayments in a bid to keep off bad debtors from the financial system. These databanks are maintained by credit bureaus. A credit score is sourced from credit bureaus which help lenders assess the credit worthiness of a borrower. The need of maintaining a good credit score can’t be over emphasized with the many firms that depend on this credit score to decide whether to offer service to a specific consumer. Also the interest rate to be paid by a borrower will be influenced by the credit score.
One of the ways of improving your credit score is to pay your bills on time. Make sure you know when your bills are due for payment and make an effort to make the bill payment before the due date. The late payment of bills will find its way in your credit report thus affecting your credit score negatively.
Ensure you make the payments due every month even in cases where you don’t have the minimum amount required. Skipping a payment makes a big damage to your credit score. Worse still, failure to make a payment may lead to the sale of your account to a collection agency. The negative effect of this on your credit score may take a long time to repair.
One of the factors considered in computing your credit score is the length of time you have stayed with each creditor. The longer the better for your credit score. To achieve this avoid closing old accounts unless they are too expensive to maintain.
Borrow money wisely. When borrowing money, shop for the best interest rate you can get based on your current credit score. Understand the terms and condition of the facility. Avoid the temptation of over borrowing so that your installments will be easy to manageable. If you take this into account when borrowing, you will reduce the chances of running into problems with the payments.
For those who have messed their credit score, there is still hope although it will take time and resources to rectify this. For payments which have run into arrears, start making huge payments to catch up. For those accounts sold to collection agencies, come into an understanding with the agency on how you are going to clear it. Your Personal Financial Mentor can advice you on how to go about this kind of settlements.
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