Monday, December 18

Your Money – Finance Column – Improve Credit Score

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Every one of us requires credit on one occasion or other even though we may be very wise with our finances.  This generally happens when we require huge sum of money in short period of time.  Taking credit or borrowing money becomes necessary at this juncture.  In order to receive credit from a lender, sound credit history and a good credit score is a must.  Credit history in simple terms means repaying capacity of the borrower.  A credit score is a number that lenders use to determine risk. Experience shows that higher credit score leads to less likelihood of default on a loan.  So, it is a must to have sound credit score if one has borrowed multiple times and needs to borrow in the future.

To improve your credit score keep the debt content to the lowest.  It is wiser to keep one’s credit card balances low.  Very high debt ratio lowers your credit score.  You should pay off your debt and not just move it around.  One must not close unused accounts as no balance may increase the score.  Open new accounts if it is necessary otherwise that will increase debt ratio and in turn reduce your credit score.

If your credit history is less than three years, you should not open many new bank accounts.  This will be interpreted as you are irresponsible about your finances.

It is advisable not to enquire about too many loans in shorter period of time giving rise to suspicion that you are going to increase your debt and this may lower your credit score. 

It is important to use different type of credit instruments.  A mix of credit cards, loans with fixed payments and installment loans can increase your score provided you use credit cards judiciously.  Opt for fewer installments while securing loan as this will reduce the time period of being in debt.  Your must know that just by closing an account doest not mean that is won’t reflect in the credit report.

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