Credit score is a measure of how worthy a person is for lending him credit. In other words, it tells the banks and other lenders on your reliability as a borrower. This score becomes a key factor when the bank issues you loans or credit cards. A low score might prevent you getting the loans that you might require when you decide to buy a house or car. A high score will save you money that you would be paying as interest over the lifetime of the loans. This score lies between 300 and 850.
The credit scores are generally made from the data present in your credit reports. One way to improve your credit scores is to make sure that all the data in your credit report is legit. The most damaging ones are the mistakes relating to late payments or the missed ones. Late payments and missed payments show an inconsistency of the borrower and lower the credit score. Sometimes the inconsistency of returning your library books might also have an effect on your credit scores.
Having credit balances spread across different credit cards may feel like a positive thing as there is no high withstanding balance but this can also be a detrimental factor to your credit score. As contrary to popular belief, having a history of taking debts is not necessarily a thing that would decrease your credit score. In fact, a well handled debt that has been paid off in a timely manner is good for improving your credit score.
An important thing to factor in while in a tight situation is not do something that would show a varying trend in your activities. Even when things are going downhill financially, maintaining status quo becomes essential especially with payments to maintain your credit score. Using cards might sometimes reveal that there an impending money stress in the near future. Revealing a Divorce issue where you are being sued for half your worth is not helping your case.
Timing your loan inquiries properly could help maintain your credit score. Each request for credit decreases your credit score and taking multiple credits over the year would add up and cause immense damage to the credit score. The calculations of these scores consider a shopping period and all the credit applications in this period will be counted as a single inquiry and not reduce the score by much.
Having a good credit score is vital to get loans while making major life decisions like buying a house etc. Hence, it is important to keep these in mind while going about your daily life and take care to improve and maintain a good credit score.