Building a good credit is like a marathon, but having a bad credit is like a sprint. – this statement was indeed proven and tested.
It really makes sense when you think about credit, specifically when it comes to “credit score”. This pertains to a grade of trust given to you by lending or business organization.
Basically, almost all lenders have limited time to know their borrowers personally. The conduct of detailed background by looking to everything connected to you will consume most of their time.
In other words, “they don’t know their borrowers”, and they need the fastest way for them to determine if the borrower is to be granted or not on their loan request.
There you have it, introducing the “credit score”. This is the time where lenders looked at. Think about your major purchases you have done, and all other information that is directly connected to you from the manufacturer up to the product or services in which you have your different transactions.
You can review every data, from customer reviews to consumer reports and create a purchasing decision. Most creditors will need same data.
The credit report is based on consumer report connected to you and the history of borrowed money you have done.
Fundamentally, credit score will tell everything, the method of aggregating the information is uniform and done thru a numeric data.
So if you don’t have your score yet in your hand, you can start building yours now and for sure lending organization will require every borrower trust score before their request will be approved. Remember it takes time to earn trust and this can be broken in a snap.
So what’s your credit score?
Knowing it will allow you to communicate to the creditors, with the score, they can determine the amount of trust they can give to you in form of lending you the money. You can build your trust score by using the credit responsibly.
But sadly, no matter how difficult you have built your trust score, it can be ruined almost anytime. So better watch your transactions before you discover that everything is too late.
Never miss your payment schedule
Building a credit score needs timing. It is not about how accidents lead you to miss payments, but this pertains on how those accidents occurred.
“Missed payments,” this affects your credit score to the fullest. Your late payment has impact on your score even if it happened years ago.
Take note “Negative reporting has greater bang,” this is a bang since it reflects accurately with you as the borrower’s ability to repay the borrowed money.
Once again, your creditors don’t have the capability to accurately know you and your character instantly. There might be reason why you have been late that leads for good, or something related to it. But your creditors don’t normally look deeper into it. What for them is when you’re late it is really a bad sign.
Missing a payment will decrease your score in a hurry. In other words,
paying on time will make your score increase also.
As remedy, you need to be on time and grow your score.
Don’t Close your old Accounts
Every relationship that you create with a new creditor, it looks back with the previous lenders as well. Normally, the old lenders will be their references. Even there was no written letter or any recommendation from you.
When an account is closed, the reference will also disappear. The previously build trust associated with your long relationship is removed from you. But negative report in connection with the account remains for a certain number of years.
If you plan to close your old accounts because of unfavorable terms, always keep in your mind that unless your credit history is well established and solid, your current score might be hit.
Don’t over extend yourself
Even though you have never missed a single payment schedule, opening quite number of new accounts could create a negative effect on your score. Now this is intriguing, why?
Let us assume that you are a lender, for instance your friend asked for $200 and you grant them so you will have a spare $200 in the future, so in other words granting your friend’s $200 loan request is not a big deal.
But what if your friend asked $200 and you knew that he owed
- $300 from friend A,
- $500 from friend B,
- $1,000 from friend C
- and $4,000 from friend D,
I am sure that you will think twice granting the loan (I’m sure you get my point here).
Your active debt plays a significant role for you to get a new credit.
Generally, lenders want their hard earned money back with interest, so the next time you plan to open new account, think again that this will decrease your credit score, so it better to minimize accounts and build them into solid one.
By avoiding maxing accounts, this will create a health score to you. And if it happens that you already max it out, clear the debt.
Never assume things
Because you believed that credit score does not have any impact on your life, you might imagine that everything is all right. Assuming things are okay because you never missed your payment schedule and max out account and these will not threaten your score, think again.
Even though things are going good, your solid credit score can be undone in a snap. I am sure you know about “credit reporting mistakes” and “identify theft”.
The most horrible part for this is that, most of the consumers will not be aware on these things until such that they apply for loan and the lender finds out that there was something that needs attention.
As immediate solution, ask for a copy of your credit score.
This can be requested annually, and make sure you have check the data frequently. The earlier you found errors the higher chances of fixing those issues.