May 15, 2020
My credit during the coronavirus pandemic
Having a high credit score indicates that an individual or a firm is creditworthy and can provide you with negotiating power while applying for credit cards, housing loans, educational loans, etc. and gives you peace of mind. It is highly desirable to maintain a high credit score at all times. To keep the credit score high, one must know the factors that affect one’s credit score. Some of the major factors affecting your credit scores are as given below;
Payment History
The most important factory that determines your credit score is your behaviour when you took a loan in the past. The credit rating agency checks your payment history of all past loans while determining your credit score. Even a single missed payment or delayed payment of any previous loan can negatively affect your credit score. Rating agencies also look at the payment history of your credit cards and the discipline followed while repaying credit card bills. A person with a good discipline of payment history gets a high credit score.
Amount of Debt Utilization
The amount of your allotted credit limit that one utilizes is also an important determinant of credit score. It is highly recommended that a person uses up around 30-40% of the credit limits allotted to ensure a good credit score. If a person who almost always uses up all his credit limits, it means the person is not disciplined in his finances and is considered a risky borrower.
Credit History Length
Generally, the longer the credit history of a person, the more data available with the credit rating agency to analyze a person’s behaviour with regards to finance. Hence, a person with a longer credit history is given a higher credit score when compared to one with lower credit history.
Types of Loan Mix
A person utilizing a mix of loans like a student loan, car loan, mortgage loan, etc. shows a lender that you are responsible for using loans for different purposes. Such behaviour positively affects your credit score.
Credit Enquiries
A person having too many loan accounts means that a person is living on credit and this could hurt the credit scores. Applying for loans at the same time at too many places simultaneously leads to too many enquiries about your credit scores and this shows that you are desperate for a loan. This can negatively affect your credit score.
Type of Debt
Generally, a credit file of a person contains history and information of two types of debts taken – the revolving debt and the installment debt. Revolving debt is like a credit card loan that has a fixed upper limit and can be used multiple times while installment debt is something like a home loan that has to be paid in terms of EMIs. The way a person utilizes these two types of debts determines your credit score.
Final Words
Maintaining an impeccable record of debt payments on time and in full, utilizing a mix of various loans are some ways to ensure that you have a high credit score.
