The world today seems to completely run on credit, with financial institution offering credits for every possible thing, be it higher education, buying a new home or a car. Most of us usually carry credit cards, usually more than one, in our respective wallets. The issue here is that, we don’t give the ample importance to credit, which we ought to do. What most of us fail to realize is that, it is essential to have a clear credit report or a good credit score if you want to ascertain a secured financial future for you and your family. While at its best, credit sure can give a sound boost to our finances, but while at its worst, it can land you in major financial crunch, if not tackled on time. Importance of Credit History: 1.
Your credit record is something which will is going to remain with you, for a pretty long span, and has a big impact on almost everything in your life, from getting a good job to buying a home for you.2. It is an essential information source, which is used by financial institutions to determine whether you are fit for the money advance. 3. The better the credit report looks, higher are the chances that a lending institution will grant you a loan. Now, if you are looking at improving your credit score, there are few points which can help you immensely.
They are as follows:1. Pay your bills within due date: We often have a habit of delaying to pay our due bills, which further get accumulated to reach a humongous amount. Late paying of bills takes a toll on your credit history, by affecting it badly. In order to maintain a healthy credit report, the first step is to have a good payment record. Almost 35% of your credit score depends on whether you have paid your bills on time. Now, even if you had a troublesome past as far as your credit record is concerned, a clean 12 month history is a good indicator that you have handled your credits well.
A bad credit record is something which is going to give you 7 years of bad luck, hence, it is a good time that you got your acts together and paid you bills on time. 2. Get & review your credit report at least annually: It is a must that you get and review your credit record no less than once every year, so as to ascertain that there are no issues in them which can cause problem in getting any sort of financial advances.
Besides that, it is also important to check your credit report prior to making any major purchases which might require a loan, such a property or a car etc. Most companies also look into your credit history, before they actually hire you for a job; hence check that your report is up to date before you apply for a job. To keep yourself on your toes and get a reality check on where you stand financially, it is most essential to have an updated credit report. It is important to get your credit report from at least 1 reporting agency, if not all 3. Along with checking your reports annually, it is essential to review other specialty reports such as your medical payment reports, history of check writing, tenant history etc. 3.
Keep your old credit cards active: You might have closed old accounts, since they are no longer in use. Even if you hardly or never use your old credit cards anymore, and maintain a zero balance in them, make sure you still keep them active. Wondering why to do so and how would that help your credit score? Well, your credit age is one particular thing which is quite essential while determining your credit score. Closing you account also has an effect on your credit utilization ratio, which is the percentage of credit available which you are using. For instance if you limit of 2000USD on your card a you have a grand left on your card then the ratio is 50%. Your credit record takes into account your oldest credit account as well and longer is the time period; the healthier is your credit history.
The average age of the different accounts, and the oldest account are two major factors, hence it is a good idea to keep you old accounts active and running. 4. Consider opening new accounts sparingly: An important factor to remember if you want to maintain a good credit score is that when you open a fresh credit account, the average age of credit gets hampered, which well is a factor in keeping your credit report healthy. It has been mentioned in the last point that both the age of the oldest account and average credit age is taken into account for your credit report, and if you keep on opening new accounts frequently, the average age gets lowered. Besides that this additional inquiry needed for opening you new credit account cab take a toll on your credit score.
Now, it is difficult not to open a new credit account altogether, however, the trick here is to spread the process over a longer span and go it gradually. Open a new account only and only if you really need to. 5. Get a good mix of credit types: When it comes to improving your credit record, experience indifferent variants of credit has a major role to play.
This mean, if you have experience with varied sorts of credit lines such as auto loans, credit cards, mortgages etc, your credit record gets a good boost. This however doesn’t mean that you need to have new credit accounts, especially loans you can’t really afford juts to give your credit score a boost. Instead you should only open the accounts as and when the need arises, while being completely sensible about the new accounts you open.