What is a credit Score?
A credit score rates a consumer’s creditworthiness. A credit score is a three-digit number that tells how you manage your finance. The higher the score, the better a borrower looks to potential lenders. Every financial institution checks your credit score because it gives an idea of your general credit health. If your score is too low and you have poor credit, you might find that a lender will offer you a higher interest rate or other unfavorable terms. In some cases, you could even be denied the products and services you want most. This low credit score limits a lot of things.
How do you get a bad credit score?
A credit score is generally a three-digit number that varies from 300 – 900. Anything that is below 580 to 600 is considered to be a poor score. A bad credit score is not accepted by Financial institutions for any kind of loan applications, credit card applications, and higher Insurance rates. If you are credit history is limited or is deleted also results in a lower credit score. Also, a higher number of “hard inquiries,” i.e., applying for credit, such as credit cards, loans, etc., especially during a short period of time, can lower your score.
Ways to improve your credit score –
- Timely payments of loans and EMI s –
During the calculation of your credit score, the most important thing that is considered is the repayment habit. The history of repayment of certain loans or payments is checked and on that bases, the credit score is calculated. Ensuring that you do not miss out on credit card dues or loan EMIs and paying the bills in full is extremely important. If you have too many loans and credit cards, it is advised to set auto-pay on one or more or set reminders for the due date on each.
- Monitoring things properly and avoiding hard inquiries –
If you are a co-applicant of a certain kind of loan it is also your responsibility to check that the loan amount is paid on time. As a result, you become equally accountable for missed payments or defaults. Don’t try any hard inquiries which lead to a lowering of credit score.
- Try not to breach the credit card limit –
Breaching the credit card limit tells us about your dependency on the credit card and lifestyle. If you think that the credit limit on your existing cards is insufficient for your needs, you should request a limit increase from your card provider. But try not to Max the limit as it can result in a low credit score.
- Don’t close your old history accounts –
After using the credit card and paying it many people think that closing the account would avoid them from using it again. But this may harm the credit card score as you are trying to delete the credit history over here. In simpler words since one of the factors in your credit score is the length of your credit history, if you close your oldest credit card account, you are also erasing this from your credit history. And if you don’t have any kind of credit history start safe from first pay your debt, and EMI on time.
Building a good credit score and maintaining it is a continuous activity that needs regular monitoring. so if you want to improve your credit score you have to keep a regular eye on your credit . If you see that your credit score is being affected negatively consistently, then you must look out for the reason and rectify it on time.
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