How to Get a Desirable Credit Score

Written by  //  October 10, 2014  //  Financing  //  No comments

Have you been contemplating of applying for your very first home loan? Your cash on hand exceeds what you need. You have already spotted the right mortgage plan that meets your preferences. It will have no effect against the expenses and fees you are obliged to pay on time. Everything is set to go, but have you checked your score – the credit score?
 
We thought getting a perfect score only resides inside the four corners of a classroom. However, once we enter the “real world” the scoring doesn’t stop after we got our diploma or earn a degree. A credit score is a kind of score we must maintain at its highest all throughout our lives. A poor credit score could prevent someone to buy a new home or new car. It could lower the chances of being hired or opening a savings account. Can you see how much damage a mere credit score could affect you in terms of venturing on any financial undertakings?

A credit score is not just a “mere” score you could easily take for granted. It serves as a barometer of your credit worthiness. It reflects how many loan approvals you could get from various banks, lenders, and credit unions. The most commonly used is the FICO® (Fair Isaac Corporation) Score, which is a three-digit rating with the ff. criteria:

35% = Payment History
30% = Amounts Owed
15% = Length of Credit History
10% = New Credit
10% = Types of Credit Used

The score ranges from 300-850. Unfortunately, the basis of your score is not by passing an exam but through real life situations. What actions one must take to achieve a perfect or high credit rating? You should:

  • Handle your finances well. Always pay your dues on time. Avoid late payments as possible.
  • Monitor your credit limit. Never exceed and avoid being an impulsive buyer. Handle your spending habits wisely.
  • Avoid at all costs being in the “Hall of Delinquent Accounts” of a Collection department. Aside from the Collection people constantly breathing on your neck, it is an indication you are a delinquent client and therefore can’t be trusted.
  • Establish a mature financial history. The longer you’ve been a responsible borrower, say, counting in years, the better.
  • Have a healthy mix of accounts. Healthy in a sense your payments are on time. While a mix of accounts means you’ve managed acquiring, for example, a variety of loans such as mortgage, auto loan, insurance and credit card.
  • Don’t default on your loan. If this happens, it means you’re not financially sound. Banks or lenders may perceive you an unfit candidate and not capable of fulfilling your credit obligations.
  • Keep your credit file void of any negative reports. The big words to be wary of would be bankruptcy, liens, complaints, foreclosures and getting a judgment.
  • Keep the number of your credit cards in check. Don’t fall into a habit of applying for a new credit card in a frequent manner with short time intervals.

Now, you are aware how to get a better score, the next step will be checking it out. Are you ready to know how you faired these past few years? You could get your credit file from the three major credit bureaus like Equifax, Experian, and TransUnion.

AuthorBio: Japs Buidon is a finance researcher and a part-time writer at homeloanshop.co.nz

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