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What is the credit score and how to improve it

Many people think that they do not have a credit score. The fact is, as long as you have a bank account in your name, never apply for a credit card or loan money for other purposes, you have a credit score.
Low credit scores indicate if you have a high risk that the interest rate of the loans will be higher to cover the risk of the lender if you fail to pay. In other words, you should try to maintain a high credit score. Take the example, Credit scores range between 300 – 850. Scores above 720 indicate that you are in a safe zone and you can get credit easily, whereas with a score below 640, you will have difficulties to find credit or can be called poor score.
Tips to improve credit score:

  • Pay bills on time
    Bills unpaid or late payment of invoices will be recorded by the creditor. For example, if you are often late paying your credit card bills, the credit card company will report your debt to the bank which resulted in a decrease in your credit score. Then, when you want to apply for the mortgage, the bank will see this credit score and making decisions in determining the interest rate etc. So, try to start paying your bills now because of all the records of your transactions will be analyzed, especially the most recent transactions.
  • Reduce Debt
    In addition to paying bills on time, you also need to reduce your debt. For those who have more than one credit card, you may consider moving the balance of the bill to a credit card with a lower interest rate. However, you should find out in advance whether the credit card balance transfer offers.
  • Avoid filing some credit simultaneously
    Financial institutions can lower your credit score if found several credit-related transactions conducted in the adjacent.

Like a report card at school, the credit score report the value of your financial management. You will feel happy and proud of your efforts with the higher value. Therefore, pay off debts, bills and check your financial statements regularly so that the value of your credit score remains high.

Here are the main factors that contribute to your credit score:

  • Payment history: This makes 35 percent of your credit score and is the biggest factor in deciding whether you can be trusted to pay back the money loaned to you. In creating the score, they will look at things such as whether you pay your bills on time every month. If there is a delay in payment on your record, they’ll see how long you pay the debt. The longer it takes, the greater the negative impact on your score. They will also see if any of your debts have been referred to a judicial officer or court and if you ever claimed bankruptcy.
  • The total amount of debt: This is the next most important factor. The general rule of thumb is that you should try and use less than 30 percent of the credit available to you. The trick is to keep what you owe to a minimum but because something is better than nothing because as lenders want to see that you can borrow money and repay responsible in full and on time. A mobile phone contract is a great way to do this.
  • Length of credit history: Your score also takes into account how long you have been using credit. The building was a good start but a short history is not bad either, provided you updated.
  • New credit: The number of new credit accounts you’ve tried to open up recently is the fourth-largest factor. If you have applied to many accounts, it is often regarded as proof you are experiencing cash flow problems that make you look like a risk.
  • Types of credit used: This is the last thing they see in coming up with your score. They see everything from store cards and credit cards to loans and mortgages. It is most important that you do not have to worry about it too much.

Get to know the sense of bad credit

Bad credit is a condition that can destroy even the financially strongest people with its implications. Bad credit situations can arise to the borrower if the borrower can be treated by taking appropriate measures for this.

Credit is divided into 2 as well and bad debt. In this case we will discuss about loans for bad credit. Previously we must understand about bad debt, credit is further divided into 3 types namely credit less smoothly, bad credit and credit is doubtful. In the world of banking bad debts this is often feared, because it would be the bank’s finances can be annoying, it gets worse it could have been bad credit can stop a bank activities. Bad credit alone was the credit that has been experiencing a difficulty to installment payment in accordance with the obligations that is caused due to deliberate action of the debtor or the presence of events outside of the alleged cause of the debtor was unable to pay the installments.

  • As for the criteria of nonperforming loans as follows:

– Could not be classified in the credit criteria less smooth, smooth or doubtful credit credit,

– Meet credit criteria is doubtful, but in the long term of 21 months when credit is doubtful categorization, yet also a settlement, installment, or an attempt to rescue credit smoothly,

– The completion of the credit had already filed a request for punitive damages in the insurance companies engaged in the credits.

  • Factor in the emergence of the nonperforming loans of the borrower

– The existence of family problems, such as illness, divorce or a waste of very excessive funds from the debtor itself,

– An error taking care of business management that is run by the debtor, owing to the lack of experience to take care of business,

– A very serious financial Difficulties,

– The incidence of events outside the alleged debtor, such as natural disasters, fires,

– The failure of debtors to manage businesses that had he lived,

– The bad Character of the debtor itself.

  • Prevention of occurrence of bad credit

– Analyze prospective borrowers, analyze this means assessing prospective debtor. Include character, the ability to installment payment each month, income, credit, guarantee the condition of prospective borrowers today, considering the obstacles that will be going through prospective debtor,

– The Bank must monitor the use of the credit, if the loan has been liquid, the bank should continue to monitor the finances of the debtor, the debtor, the debtor’s development efforts after a given loan,

– Inspect carefully credit guarantees, collateral is very necessary to check, due to better anticipate the possibility of the debtor pick or can no longer afford to pay off the debt.

  • The resolution of bad debts
  1. Rescheduling or change these terms concerns the payment schedule, time period, grace period and magnitude of installment credit. But not all debtors can give all these policies, only debtors who have be honest who can give,
  2. restart or reconditioning Requirements, changes to the terms of the credit are not limited to, terms such as interest rate, the time, the payment schedule should be considered again,
  3. Rearrangement or restructuring, changes in credit terms which include the addition of bank funds, the conversion of the whole or a portion of the interest debt into new credit facilities,
  4. Extreme low liquidity, the sale of goods in collateral for the repayment of the debt.
  • Do not exceed the capabilities of the repayments.

When you submit a loan, the thing you should consider is your ability in installment, you should consider your finances in the future, in the formula of the maximal mortgage banking, debt-debt each month who are still capable in tolerance is 30 of the total monthly income