There are a good number of reasons why you should focus on creating a good credit history. Maintaining a good credit history allows you many benefits. Namely, you can get loans at a much better rate; you can discuss mortgage at better terms,etc.
Speaking of which, we are going to explain how a credit score is evaluated and what steps can you take to improve your credit score. Pay attention to these,and you will do fine.
Evaluating a Credit Score
Every credit score company has its own approach to determine a credit score, which they are not very open to discussing. These companies are very strict about discussing their methods in public. But they do inform about the factors they use to evaluate a credit score.
These factors are the number of accounts someone has, whether they pay bills on time or not, and how far back their credit history goes. Following, we are going to discuss these in details.
Pay Bills on Time
Your payment history plants an important role in calculating the credit score. Therefore you need to avoid late payments, make them on time every month. If you are afraid you won’t remember the time, you should use credit issuer offers.
Small Business Credit Cards offer SMS and email reminders for payment dates. You can also set up anautomatic payment from the bank account.
Debt to Credit Ratio
For the best results, you need to keep debt to credit ratio low. The amount you owe is asecond most important thing after payment history. It pays off to have a low debt as compared to available credit.
In order to maintain a low rate, you need to keep debt in control and enough credit available in your account.
You should never apply for every line of credit you can instantly. Yes, restrain yourself from applying too many new credit lines at one time because it ruins your debt to credit ratio. If you have managed to keep a low ratio, you shouldn’t apply for new options instantaneously.
Every application will open a new inquiry and will have anadverse effect. It may seem like to the vendors that you are applying for way too much credit.
Open and Close Accounts
As lenders want clients with a strong credit history, you may ruin your credit score if you open and close account on a regular basis. Instead, you should leave some accounts as they are with a good credit standing.
This will help you devise which credit cards you should carry, and which loan option you should apply for. Maintaining old accounts with good history opens up new possibilities for you.
You don’t have to be Afraid of Anything
We understand we made some drastic points,but you don’t need to be afraid of credit. Maintaining a good credit history depends on creating a habit of managing your accounts the right way. Doing so, you won’t even need to burrow any money. However, developing a good credit history depends on dedication.
Founder Dinis Guarda
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