Tag Archive | "Credit Score"

Low Credit Score: Everything You Should Know


Credit-Score

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If you have a bad credit score, it can feel as though the world is against you. You have probably heard the word ‘no’ a million times since your score got low. Your credit history can affect all areas of your life, and you might feel like you have no options available to you. If you don’t know where to turn, you have to take action yourself. Sometimes, the shock of the situation can make things super tricky. That means that you need to think about what you can do right now to make a difference. Here is everything you need to know.

Credit cards can help you

Many people think that having credit cards is the cause of their problems. If you think that your credit card is an endless source of cash, you will get yourself into trouble. When you accept that your card is a finite thing, you can start using it to your advantage. For example, if you have to pay for an expensive thing, such as a vacation or a device, you should do so on your credit card. Immediately afterward, you  need to pay off the outstanding balance. If you do this a few times, you will find that your credit score improves.

Talk to your bank manager

The first thing, you should do, is talk to your bank manager. You may have avoided taking this step in the past, but now it is time to take action and do it. You should not fear what the manager will say. Go in there with an open mind and ask for help. The bank penalizes people who don’t seek their help. In fact, if you don’t talk to someone about what is going on, you could find that they start to charge you. It will feel much better once you have booked an appointment and taken responsibility for your finances.

You can work on your score

Do you realize that you can work on your credit score? Some people think that there is no way they can boost their score. They believe that once they have damaged their score, it is too late to do anything about it. That is not the case at all. In reality, there are many ways you can boost your credit score. If you start to make a plan of action, you will find things easy. Think about ways in which you can improve your credit score and start from there.

It is possible to lease a place

One of the great many myths about credit history is that it will prevent you from doing necessary things. Some people will tell you that having a poor score will stop you from leasing a house. That is not true. Sure, some companies might be dubious about your financial situation, but you can lease a home with damaged credit. It is myths, like this one, which prevent people from moving forward and taking control. When you fear that things might get worse in the future, you will find it super hard to do anything at all.

Money management is key

You need to start managing your money. When you are ready to deal with your finances, management will be critical to your issues. If, in the past, you have found it difficult to track your spending, now is the time to do something about it. Start keeping a spending journal each day. It might sound a little silly, but it will help you to understand where your cash is going. If you have a written account of your expenses, you will find it simple to start cutting back and saving money.

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Insurance and credit score – How are they related?


If you want to get a good rate on your relevant life insurance, then that would depend upon a number of factors. You will be surprised to know that your credit score is one of them. Many a times you wonder whether your credit score has any significant influence on your rate of premium that you will be getting for your life insurance. The reality is that there is a significant influence and thus you should monitor your debt situation closely as this not only increases your interest rate on new loans but also premium rates on different insurances. In case if you have a low credit score it does not imply that you won’t be able to get a life insurance it means that the premium rates you need to pay are substantially higher than if you had high credit score.

The reason most insurance companies look for your credit score before giving you a premium rate is that they factor the components of your credit score into the cost of your insurance policy. This is because your responsibility and your payment habits can be gauged from your credit score. If you have some unpaid bills or financial obligations that you have missed, then you can expect an increase in the cost of the premiums of your life insurance. This is because missed payments and bad financial records translate into low credit scores which in turn generates a higher premium for you.

It might seem to you that basing the rate of your premium on your credit scores is unfair, however there is a sound logic behind it. The insurers generally consider that if a person is irresponsible when it comes to matters of managing money, then he will be irresponsible in other matters too. Thus

You may think giving higher premium rates on life insurance for a person with a bad credit score is unfair. But using the insurers’ logic, a person who is irresponsible with money management might also be irresponsible in other fields of life, and therefore has a higher insurance risk. Because of this higher risk, people with low scores are more likely to file insurance claims than those with high credit scores. The problem is that with the ongoing financial crisis in the nation, there are a number of people who are facing severe financial downturns. This is making their credit reports have bad records and thus a drop in credit score. The good news is that if you can explain your financial problems with respect to the financial crisis, then you may get a special dispensation which will be formalized by the company.

Since there are different evaluation criteria of credit scores by different insurance companies, some might offer you quite good premium rates per month even with not so stellar credit score. Hence, when searching for a life insurance policy for yourself, don’t get deterred by your bad credit report. Try and repair your credit so that you can get better premium rates.

Insurance and credit score – How are they related?

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How Paying Bills On Time Monthly Will Increase Your Credit Score


Paying Bills On Time Monthly Will Increase Your Credit Score

Paying Bills On Time Monthly Will Increase Your Credit Score

INTRODUCTION:

A good credit score on a person signifies financial prudence and stability and carries great benefits. To mention a few, a good credit score holder gets loans and credit cards, and approval for houses and apartments easily and quickly. She can save more money because interest rates would be low for her. Higher credit limits would be approved for her without much ado; she gets more negotiating power in other similar financial transactions, better auto-insurance rates, etc. A good credit score also accounts for a peaceful and better quality of life. Conversely a bad credit score gives the impression of a financially irresponsible person. It denies to the holder, all the above and much more. Keeping a good credit score is therefore absolutely important.

CREDIT SCORE:  ITS COMPONENTS:

The following factors are taken into account while calculating one’s credit score –
a.  Your Payment History (35%)
b.  Level of debt or Credit Card Utilization (30%)
c.  How long you have had credit (15%)
d.  Your last application for Credit (10%)
e.  The Types of credit you are using (10%)

Since payment history of an individual occupies a prominent place among the above, roughly one-third of it – a good performance here can significantly boost your creditworthiness. The only way to build a positive credit history is to pay the monthly bills regularly and on time. Building a good payment history takes time but default on just one or two occasions can neutralize it.

PRIORITISING YOUR BILLS: 
Unfortunately so many people are not aware of its importance. Many among us miss payment deadlines for foolish and insignificant reasons – forgetting that a bill is due, ignoring it for some other work, going on a vacation without making any payment arrangements, and the like. Some on the other hand though aware of its significance, do not know which bills to pay first and which ones later. Lack of clarity makes them default on more important payments while using that money to pay bills which they could have avoided for the time being without risk of a negative impact on credit score.

So it is necessary to know which bills affect Credit Score the most and to prioritize their payment. It is advisable to pay credit card bills, and loan installments on home, car or furniture at the very first because any default on these will be directly registered in your credit report. In case of the latter, it can also cause foreclosure or dispossession which can totally ruin a person’s financial credibility.

Next will come Service credit, that is – electricity, water, telephone bills, natural gas etc. These are not in the nature of loans and their regular payment does not add accolades to your credit score. But defaulting on them for extended periods is an ill-considered step as you run the risk of being labeled ‘delinquent’. Your account will then be closed and all the information handed over to a collection agency. They in turn create a ‘collections account’ which can drastically negative the credit score. However, it will only happen after the company has made repeated efforts to contact the defaulter for payment over a reasonably long time without success.

MAINTAIN DIFFERENT KINDS OF ACCOUNTS FOR MAXIMUM ADVANTAGE:
When you keep different kinds of credit accounts and consistently pay on time, it can significantly boost your credit ratings. For example – payment details of your credit card account, personal loan, and home and car loan are generally reported in your credit report. Being regular and prompt for these payments will gradually build the necessary creditworthiness for you. You will then be considered a good credit risk and companies will consider it viable to extend loans to you at easy interest rates.

CONCLUSION: 

In addition to weakening your creditworthiness, not paying on time also results in you paying more through fines and penalties and should be anathema to any person who desires financial security. Diligently footing monthly bills also goes a long way in improving your reputation with the company you are transacting. In case you hit a financial block you can then convey your position to them. If you have already built a fair reputation, they will be understanding and may even assist you to work your way out of these problems.

About the Author:

The above article is written by Peters from Page Once. She recommends that  forgetting that a bill pay is due can lead you in severe financial issues which might prove fatal for you and your family.

How Paying Bills On Time Monthly Will Increase Your Credit Score

Posted in Debt, LoansComments Off on How Paying Bills On Time Monthly Will Increase Your Credit Score


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