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Increasing Credit Scores and Trustworthiness

By Ruth Racey
Published: Saturday, December 5th, 2009

Creditors and lenders look at credit scores to determine if an individual is worthy enough to avail of financial options. A credit score essentially gives financial institutions an idea of how trustworthy a consumer is. These scores allow banks to assess an individual’s worth at first glance. For these reasons, it is imperative that Americans take good care of their credit scores.

Financial experts say that the first and foremost cause of poor credit ratings is lavish and uncontrolled spending. If any income runs out in very little time, then a consumer may have problems with how he or she manages money. Card issuers and lending companies run away from consumers who live beyond their means and max out their credit limits. This kind of individuals represents more risk than what creditors and lenders are willing to accept.

Fortunately, consumers can take steps to increase their credit scores and improve their credit ratings. Specialists agree than a score of below 700 deserves serious attention. Most creditors and lenders are hesitant to extend services to Americans who have credit scores below 700.

Under the law, consumers can ask for their free credit reports annually from each of three credit bureaus, Experian, Equifax, and TransUnion. To say that these agencies are perfect is a huge mistake. Studies have shown that as much as 40 percent of all credit reports from the credit bureaus contain errors of varying degrees. Some mistakes are simple clerical and spelling errors while others have more serious consequences. No matter what the causes of the mistakes, these errors can result to lower credit scores and ratings. Even if the problems are not the consumer’s fault, they have to contend with the consequences.

Consumers have to monitor their credit reports regularly to ensure that they are free from any grave errors that can severely damage their credit ratings. Because these ratings are the only basis for a consumer’s reputation, credit scores play a crucial role in the financial lives of millions of Americans.

However, if there are no signs of major mistakes in the credit reports, then consumers have to accept the fact that they themselves are at fault for their financial worries. Overspending and unnecessary purchases can only lead to more credit score deductions. Failing to pay on time and having too many untended cards can also result to poor credit ratings.

It would also do cardholders well if they learn how to control their urges and limit purchases using plastic. Credit scores are computed based on several factors, including the ratio of outstanding balances to current credit limits. The lower the ratio, the higher the credit score. Knowing how the credit bureaus come up with ratings is crucial for consumers to find ways how to increase their credit scores.

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