Your credit rating tell the banks about your financial situation and debt repayment
capacities. Credit rating companies keep a track of many things like how many
time you defaulted on your payments, were they on time, how many times you paid
late and how well you are on your debt repayments. Based on these factors they
prepare your credit rating over a period of time.
The importance of a good credit rating can't be understated. Sometimes, the
difference between an excellent credit rating and a poor one could be getting
a 0% APR deal on that credit card or being declined out rightly or paying APR's
that shoot through the roof. . Due to poor credit ratings, which is usually
caused by high credit card debt it will surely be very difficult qualify for
any loan with a decent interest rates and lenient repayment terms.
- Credit ratings can take a downward jump suddenly or can decline over time.
There can be many reasons for this decline. Here are a few of them.
A job loss with no other source of income can have drastic impact on your
finances, and if you are not financially secure the over dependence on credit
cards for funds can decrease your credit ratings.
- A sudden illness and huge medical bills with no financial backup is a big
cause for decline in credit ratings.
- Though bankruptcy settles debt, but it has a very negative impact on your
credit rating. And it shows for10 years on your credit history thus driving
the potential lenders away.
- Unless you are very rich and can absorb the financial impact of a divorce,
it can severely damage your credit rating because of the huge alimony and
- Paying your credit card bills or loan installments after due date will cost
you in terms of credit ratings, though you might never have defaulted on the
- If you apply too frequently for credit cards in a 12 month period and constantly
juggle your outstanding balances with 0% Intro APR credit card offers, your
credit rating will decline.
- If you have a habit of just paying the monthly minimum on your credit card
outstanding balances, you are shooting yourself in the foot. This is the costliest
method to repay credit card debt and will surely have a negative impact on
your credit ratings.
Credit rating, is a very very vital part of our lives and by having a good
credit rating we ensure that, we are good risk to lenders .Keeping the repayment
schedule with timely repayments and staying within budget will avoid any credit
card debt and keep the credit ratings at the top.