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3 Basics Of Improving Your Credit Score

Even though you might think that having an adverse credit score now does not really matter, by the time you need it for something you want to get (like a credit line), it is usually too late to do anything that will make a material impact on it. I do not work for the bank. But I can see that the system of credit profiling makes perfect sense for one. How else are you going to judge a person’s financial habits when you are dealing with someone for the first time.

A credit score is basically a points system that gives an individual a specific score based on the recent financial behaviour of that individual.  The final number is determined by an aggregation of cash behaviours like the promptness of repayments, the occurrences of full or partial payments, the frequency of going into negative cash positions, etc. The bottom line is that if you fully make all your repayments each month before the due date, you will have a good credit score. A good credit score can entice a lender to give you favourable terms or even give them the confidence to give you a bigger loan. With a bad credit record, a lender might just dump your applications into the trash.

The first thing you should do is to review your personal credit facilities to see if you are taking on too much credit. There is a tendency those with credit problems to borrow from one channel to repay another channel. For example, you might borrow from one credit line to repay another credit card bill. This will adversely affect your credit. You will be tempted to do that if you are holding onto too many credit cards. You really do not need so many cards. The main reason why so many people have multiple cards is because of the freebies, reward programs and special features to each unique card. Once that freebie is collected, the card is the same as any other card. Cancel the extra ones. You will also have less trash in your mailbox every month as well.

The second thing you should do is to train yourself to think about borrowing as something to avoid. Sometimes we are so afraid of using our own money that we cannot bear the thought of dipping into our savings. Or we can become so engrossed in keeping a cash buffer for emergencies that we refuse to use our own money to buy stuff. A huge number of people who owe money to banks have the cash to fully repay the debt but just refuse to do so. You can do this. But having unpaid debt over an extended period of time will negatively affect your credit.

The last thing you should keep in mind is to avoid non-payment at all costs. There is a big difference between not paying at all and making a partial payment. The grading is at least a one-level difference. So even though you might know you are unable to repay your bills this month, at least make an effort to make the minimum payment so that you do not fall into the lower grading.