A Detailed Credit Score Guide

While the best thing would be to stay away from loans and borrowings, this is not possible for most of us. Even those who can stay away from borrowings and debts often get into loans and borrowings because of some obvious reasons. They look for avenues to save on taxes and in this country, there are many types of borrowings that get tax exemption or a lower percentage of taxes. Further, we need money because of some emergency situations and also for buying that dream home or for other purposes. Whenever we talk about borrowings or loans, we also perhaps understand the importance of credit score. Financial institutions expose themselves to risk when they lend to their borrowers. Hence, it is quite obvious for them to be sure about the repayment capacity of the borrowers. This is evaluated in many ways and credit score is a comprehensive method of appraising the credit-worthiness of a borrower.

CREDIT SCORES OFTEN GO FOR A TOSS

Almost all borrowers understand the importance of credit score and they make all efforts to keep them in good condition. While a majority of them succeed in this, there are thousands of borrowers, whose credit scores often go for a toss. In most cases, it happens because they fall behind on their repayment commitments and their bill payments also get delayed. There could be many reasons for such defaults and delays. Most of them are not done with some wilful purpose at the back of their minds. Sudden jobs losses, and business closures, as it has happened because of the 2008 financial meltdown or the latest covid-19 pandemic, contribute to such damages to individual credit scores.

On the other end of the spectrum, there are scores of borrowers who are downright irresponsible, thrifty and indiscreet in their borrowing and spending habits. They are the ones who are more likely to damage their credit scores even when the going is good. Whatever may be the reason for a damaged credit score, borrowers, banks and financial institutions are often extremely strict and even merciless when it comes to extending loans to borrowers who have a bad or damaged credit score. There is a minimum credit score threshold that most banks and financial institutions follow. If the credit score falls below that threshold getting a loan from reputed financial institutions would be difficult and perhaps even near-impossible.

These borrowers have no other option but to go in private borrowing from private lenders. These loans come with a heavy interest burden attached to it. The repayment terms are also quite rigid and the loan amount that is approved for borrowers with damaged credit scores is also much lower when compared to those with decent credit scores.

Hence, it is quite clear from the above that if you want to be a preferred borrower, there are a few things that you must always bear in mind. You must make sure that your credit score is always in good health. In case it has been damaged beyond repair you must understand the importance of following the right CREDIT SCORE GUIDE that could help in rebuilding the same. However, you have to bear in mind that a credit score once damaged is not easy to rebuild and it takes a lot of time, patience, perseverance and most important fiscal and financial discipline. We are happy to list down some of the things that could be considered as a proven and time-tested guide for rebuilding credit scores that may have been damaged for various reasons.

ASSESSING YOUR CREDIT SITUATION

Before you get into the task of repairing your credit score, make sure you have fully assessed your credit situation. Make use of all the credit score agencies and find out that all the reports are in agreement. Find out the reasons why your credit score dropped. Unless you are honest with yourself and are ready for introspection you will not be able to move forward. Identify the specific areas where you have slipped so that you can start planning the required corrective actions.

FIGHT OUT INACCURATE INFORMATION

While assessing, if you come across inaccurate information, please make sure that you dispute it strongly and fight it out. As a borrower, you are within your legal right to dispute entries or information that you consider wrong and factually incorrect. Deletion of a few inaccurate information could go a long way in boosting your credit score and you should never ever exhaust this option before moving forward.

PAY DOWN DEBT

Paying your existing debt is one of the most important ways to improve your credit score. Yes, getting rid of old debts with interest is quite a big task but it has to be done carefully and diligently. Do not worry if it takes some time, but ensure that you clear the accumulated debts in small bits and pieces. Always bear in mind that old, unpaid and accumulated debts account for almost 30% of your FICO scores. Doing other things without settling your unpaid debts will take you nowhere when it comes to improving your overall credit score. If possible mortgage your movable or also immovable assets to make sure that old debts are settled as soon as possible. When doing so, please make sure that you are in a position to repay the loans that you will be taking for this purpose. If not, you could run deeper aground and further damage your credit score beyond repair.

THE IMPORTANCE OF BEING A RESPONSIBLE BORROWER

There is no doubt that loans are easy to come by these days. There are many avenues to borrow unsecured loans such as personal loans and credit cards apart from secured loans like car loans, home loans, and jewelry loans amongst other things. You must avoid the tendency of going overboard when it comes to your credit habits. You should be extremely strict and discreet when spending even a dollar from your credit card. Do not borrow unless you are sure that you will be able to repay it. Keep some money apart for rainy days and unforeseen happenings and events. Avoid falling into the trap of credit card loans being carried over to the next billing cycle. In other words, stay away from revolving credit.

CONCLUSION

To conclude, there is no doubt that credit score is one of the most important attributes for deciding on any loan from the lenders’ perspective. The borrowers should also be aware of this and do what it takes to improve the credit score rating. Small, consistent and regular steps could help overcome the problem.