All credit card users will never underestimate a term that is integral for the survival of anyone’s financial life. Yes, most of you might have guessed it right. The term is the unprecedented and all powerful ‘credit rating’. Credit ratings are all important for the life of any credit card user. It is depending on the student’s credit rating that banks determine if a person is eligible to acquire a loan or not. With banks increasingly taking to the employment of credit bureaus that determine how worthy a person’s financial character is before authenticating a loan, of late, acquiring a loan has become a not so easy task. These credit bureaus are responsible for the compilation of a credit report, which is duly submitted to the bank. A credit report refers to a document that provides excessive details and information on an individual’s credit history, his spending pattern, and an overall rating on his spending pattern. All this information is reported by the individual’s bank to such a credit bureau with all details like the loans acquired by the person till date, the number of credit cards held by him and other borrowing information. Minute details like the date loans were acquired, the credit limit possessed and exercised by the individual, any outstanding amount pending and other details are also not ignored. After analyzing and assessing all this information, the individual’s credit score is then generated. However, this score is not made a part of the report itself and is available separately.
Credit scores are considered to be highly important by lenders as they are a thorough reflection of the individual risk that a potential borrower might hold for a lender. When lenders seek to access the credit score of an individual, they also desire his credit rating as it instantly informs the lender if such a borrower is worth offering the loan or not. Lenders also enjoy the flexibility of deciding what scoring model they would prefer to employ and often customized scoring models are used that focus on that aspect of a borrower’s profile that is highly important for deciding on the loan. Other key information and data like the income earned by the person, and other internal criteria which is in accordance with the company’s lending policy. Lenders may also use the credit score of an individual in determining other key factors like the interest rate offered to such a person. In such a scenario, the interest rate would be subject to the discretion of the lender. Individuals get time to gradually nurture and brighten their credit scores over a period of time. All you need to do is make credit worthy behavior a norm of the day. People need to be consistent in clearing their credit card bills on time, timely payment of EMIs and interest rates and so on.
Never skip or delay in paying your installments. This is one golden rule which should never be broken to maintain a good credit score. Even one late payment can significantly hamper your credit score, and it may take a while before it gets back on balance. Instead of shifting your debt from one account to the other, repay it off as soon as you can. If you wish to keep credit cards, use them wisely. Although credit cards may improve your credit score, if you mismanage it, your credit score may just go down in vain. Never close unused credit cards in order to raise your score. This short-term strategy would serious hamper your credit behavior. Do not blindly sign up for a number of credit cards. If your credit score has had any adverse impact, then remember that it will take time to get back on track. Since credit scores are based on your credit history it may take a while to recover. However, accurate negative information is not easy to undo. Thus, make responsible financial decisions to top the charts of your credit score.