Despite all the painstaking efforts, our credit scores go under the earth. There might be circumstances that may require that you channelize your money on – maybe someone’s at the hospital or any other emergency and you may not be able to repay the credit. If you already have a bad score, there are definitely ways to improve it so that it helps you in the future. In this article, we shall learn here how to improve credit rating and be happier in life.
What are the credit scores?
A credit score determines how worthy a person or a company is in order to forward loans. There are institutions that rate people based on their clients. For example, the United States has an organisation called the Fair Isaac Corporation(FICo) which does this.
Usually, credit scores range between 300 and 850 and any score less than 579 is considered to below. Experian opines that about 61% of the loans to borrowers with a credit score lower than 579 are more likely to default.
What do the credit scores consist of?
The credit score consists of your previous borrowing information like:
#1 The amount borrowed from an institution or person.
#2 The frequency of repayment
#3 Regularity of repayment
#4 Total amount owned by the borrower including the mortgages, credit cards, etc.
How important is the credit score?
Your credit score determines almost all the financial spheres of your life. With a bad credit rating, you may not easily get loans at affordable rates of interest to start your own company. This means you will even have to continue with a job, even if you are not interested in it. If you are applying for a job, there are good chances that the employer will look into your credit history before hiring you and deciding your package.
How to fix bad credit?
Now that you already have bad credit, you have two tasks at hand – first, to improve upon your loans and second, to prevent the same scenario from recurring.
To improve your loans, you should consider paying out your EMIs regularly. You may want to schedule online payments or subscribe to alerts from the banks to remind you of this. Pay your credit card amount off by paying a little above your monthly amount.
Next, you should be very careful while borrowing loans in the future. It is a good idea to borrow only under 50% of the available credit (actually 30% is preferred). Also, make sure you don’t delay the payments here, or else, your scores will further slip down.
So, this was all that you may need to know about fixing bad credits, if you wish to learn more, you can learn here.