Credit record or score is not an unfamiliar phrase in financial circle. It is the record of your financial behavior that is assessed on the basis of how good you have been in repaying loans or if you have defaulted on it. Your credit score can decide whether you will be able to obtain loans in future or get better interest on fund offering. An unfavorable credit score makes it tough to get loans and even if it is provided, you are charged extra. This is due to the fact that you are a high risk borrower. This elucidates why you should always maintain a good credit history.
Debts are recorded in credit file, thereby dropping score further. So, you should resort to some financial means that can effectively solve debt issues. There are some financial facilities such as debt counseling, bankruptcy that can help you get rid of debt trap. They leave influence on your credit score in different ways. So, you must know nitty-gritty of every available individual option so that you find it comfortable in making an educated decision.
Some tips on Improvement of Credit Score
If your credit score is not up to the perfect slab, it will ruin your chance of getting a loan. Even if you get it, you won’t have much of chance to negotiate down the interest rate. The first initiative for you is to get a copy from the credit agency. Each of three credit agencies is obliged to hand over a free credit copy to you annually.
Check your credit report for errors. It sometimes contains inaccuracies which need to be coerced immediately. Elimination of bad debt entries will automatically improve your credit rank by a few notches. If you have to bring round your credit standing to normalcy, it is important to work on the strategies. Before that, assess where you stand financially. If cause is known, options for cure can be found out.
Other Measures to Score up Your Credit Point
Always make it a point to pay the bills on time. Failure to make timely payment will score down your credit ranking. The creditors will directly report to the credit agencies about your non-payment of minimum regular installment. If you don’t pay for mortgage loan in time, it will be considered a bad attitude which, needless to say, shears off your credit point. Never overstep the overdraft limit as agreed upon, otherwise such things will be immediately reported to the authority. It is also better for you to avoid the overdraft fees.
Those who can successfully manage their credit are definitely aware of those factors that can build up their credit score and also drag it down. All cleared – that should be the status of your bills. Don’t jump for bankruptcy just because you are seeking relief. It will be like a temporary peace of mind that won’t take much of time to turn into a nightmare when the stigma will continue to exist in your credit report for many years to come.
All your credit and unpaid debts will find a place in your credit report. Take out a consolidation loan for your outstanding dues. Every credit is registered as an individual entry in your credit record. All these make an adverse impact on your score. To make an improvement, you have to bring them together under a ‘consolidated’ category. However, if you have identified any wrong entry, you can argue against it and report to the credit agency which will eliminate the record once it is sure that the dues are already cleared.
There is a certain limit of borrowing which the lenders don’t exceed. Being closer to this limit, you are less likely to get a loan. If you have already borrowed a larger sum and applied to take out more, the lenders may have a doubt about your ability to pay off. It sounds wise if you discuss with the lenders to expel their doubt. If you get the approval and pay off the loan timely, your credit score will eventually show an upward movement.
Debt Counseling & Its Impact on Credit Score. Debt Counseling from a Close Quarter
Some people express doubt whether debt counseling can bring improvement in their credit history. They fear that their dented credit history will get afflicted with more negativity due to the choice of debt counseling. But the reality is just polar opposite. Debt counseling helps you eliminate debt-related problems and thus improve your credit rating slowly but steadily over a span of time. The program saves you from delinquency or default in payment through efficient use of financial management methods. This leaves a positive impact on your credit score. So, you can always enjoy a positive outcome by enrolling in a debt counseling program.
Bankruptcy is also a way out of debt but it inflicts a negative impact on one’s credit history. If you file for bankruptcy, it will show up in your credit details and stay there for years to come. This will create an obstacle for you to get further credit. Bankruptcy should be treated as the last resort when other options fail to work out. You must always try out the alternative options to solve your debt problems and up your credit rating.
When you contact the debt counseling authority, it shows that you are really serious about your financial commitments and want to make changes in your finance management principle to payback the dues as quickly as possible. This positive stand is liked by the creditors and they too extend their help. However, most people do a lot of hesitation when it comes to making a decisive choice. That makes the matter worse with the passage of time and leads to a situation when the debt amount becomes so high that the debtors find it hard to live with even reduced and rearranged periodic payment.
Debt Elimination – Those Big Claims Actually Vanish
There are thousands of companies that claim about debt elimination within months. They are on everywhere, TV, Radio, Print Media and Internet. They promise to solve your debt related issues without any bankruptcy filing. Removal of bad loans from your credit history will bring much improvement in it. There is something very common to what they advertise through different media:
- We make a plan after understanding your situation and calculating how much outstanding debts you have.
- Bankruptcy will damage your credit history and also limit your options of getting loans in future. We show you other ways of debt elimination that will improve your credit score.
- We maintain secrecy regarding your personal details.
- We always avoid expensive debt consolidation procedures.
First of all, you need to understand that most of these companies are not legitimate. They are in habit of exercising shoddy practices and these often lead to a situation that can only be compared with Pandora’s Box. Instead of getting out of debt, you will feel like being pushed into the problem and end up paying more than what they claim or your initial calculation.
These companies get a large number of debt-ridden individuals as their clients. The reason is, most of these clients are laymen and can’t decide even if these companies are sham are not. Moreover, these companies also put on a good appearance and convince the people like you with their impressive way of talking. They actually take advantage of your financial woes and make profit at your expenses.
WARNING: Never Believe Their Fragile Promise
How to Decipher Scams
- All these claims are very convincing at a glance. But once you carefully read between the lines, you will notice that these companies restrict their focus only to one aspect of your financial state and give no mention of other dimensions of debt issues.
- Some of these companies don’t behave suavely when it comes to dealing with your creditors. These companies take a tough stand to succeed in reducing debt for the clients. However, though you will get temporary relief but this will invite a negative impact on your credit history. The ultimate result is you will find it harder to get loans in future and even if you manage to get one, you have to pay more for interest rate.
- Many such companies charge an abnormal fee just for an easy debt consolidation. In most of the cases, the debtors have to pay a higher interest rate in spite of their debts being consolidated.
These companies often apply those tactics which you can do on your own without paying for any charge. Even these companies are legitimate, it is better if avoid them and instead, sit down with your creditors and make a good debt budget plan. Also consult with your family members to make a monthly budget that will accommodate a part of debt repayment per month but what will not be too hard to live with.
Summary: How to improve a FICO score
A FICO score may not sound a familiar word for many. This score is actually what the banks look into when someone applies for a loan. FICO score is based on a formula devised by Fair Isaac. An applicant’s repayment ability that gets evident from the FICO score is the main concern for any banking house.
Your FICO score depends on some crucial factors which are as follows:
- Your ability to manage finances
- If you pay bills timely
- Your credit-to-loan ratio
- If you have unpaid bills or outstanding debts
These factors give you enough idea about how to improve your FICO score if you don’t have a good FICO profile. Let us examine the following points that focus on how to up your score without any hitch.
Manage your finances
Your inefficiency in handling finances will get reflected in your score. Banks always check your score to make sure whether you can be trusted for loan payback. So, if your finance is at sixes and sevens, try hard to clear the mess-up and keep everything under your control.
Never delay in paying bills
If you are serious about score improvement, always pay the bills earlier. You must have noticed a due debt column in your electric or phone bill. It serves the purpose of warning the consumers that if payment is made after this debt, they will be charged fine. FICO score will project your late payment habit which the banks do not like at all. Lending someone who will default on scheduled payment is not a comforting idea for them and you will be denied loan for this reason.
If your borrowing is approximately 100% of your credit limit, it implies that you have not saved adequate amount of money or don’t earn enough to pay off bills. It is good if you have your old credit card accounts opened even after full payment. It shows the banks that though you have credit but you no longer use these accounts. That adds to your credit score.
Some people are really worthless when it comes to managing a money-game. They overlook the due date on bills. With time rolling on, the unpaid bills create debts. These people are so forgetful that they hardly remember about the date of debt settlement. Bad debts are very rigid and stay on your credit record, thereby resulting into drop of your FICO score.
850 is considered the perfect FICO Score. Even though it is tough to be closer to perfection, you can still manage a good score through better handling of your financial condition.