The importance of a good credit
score can never be understated. Whether you want a loan with low interest and
large amount, a gold or platinum credit card, mortgage at good terms, car loan
at cheaper rates or simply have a good financial credibility -- none of it can
be achieved without having a good credit score. There is no instant solution to
get a good credit score. It builds up gradually based upon how well you manage
your loans and financial situation. However, the credit score can degrade at
quite a rapid rate if there are consistent defaults on loan and credit card bill
repayments. Repairing the credit score is not that difficult provided you take
these 5 simple steps into consideration.
1. Check your credit report regularly
This is a must to ensure that you know your current credit score, and what is
ailing it. If there are any inconsistencies in your credit report get them
corrected. Keeping bills of all the transactions you make can be very handy and
helpful in correcting any errors in your credit report.
2. Get rid of those extra credit cards
The temptations to own a new credit card are so numerous in modern times that
many of us end up with a purse-full of them without any real need. They stay
there and cause a lot of problems in repayment. The confusion that comes with
too many credit cards can easy lead to a missed payment and resulting penalties.
Frequent defaults will reflect poorly on your credit score. So, keep only the
necessary and discard the rest.
3. Repay on time
Every credit card transaction is a loan that has to be repaid on time with
interest. Don't ever miss out on any repayment. If you are not able to make full
payments, make half, or even the monthly minimum, but don't default. This will
keep you in the good books of credit card company and help your credit score. If
you are not able to pay anything to the credit card company, don't shy away from
them, call them, explain your problem and work out things so that a negative
report doesn't land up with the credit reporting agencies.
4. Keep your debt to balance ratio low
A low ratio means that
you are repaying on time. This factor has carries a lot of weight while
determining your credit score. A low debt to balance ratio goes in your favor
while it hurts your credit report badly when this ratio is high. The high ratio
says that you are not able to manage your finances well, borrow more than you
can afford, and the repayment is not up to the mark-- in short a good candidate
to accumulate a lot of credit card debt. Always, avoid giving this impression to
the credit card companies.
5. Report emergency situations to the credit card company
We all have emergencies, an accident, a death of loved one, a serious
illness- it could be anything. Such situations take a serious toll on our mental
and financial health. Credit card companies are aware of such situations and act
compassionately if the matter is reported to them. If you face such a situation
report it to the credit card company immediately, and explain your situation.
Tell them clearly how much time you need to recover from the situation. An
amicable solution can be worked out with the credit card company so that the
ramifications of this emergency situation doesn't reflect badly on your credit
Nothing beats good financial habits in keeping a excellent credit
score. However, fixing a bad one is not difficult either all it needs is a bit
of commitment and resourcefulness. The above 5 tips will help you repair
existing credit score and keep it in good shape for future.