Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected
Credit Score News, Tips & Advice « Credit Scores > Credit Score Tips > Credit Scores: Why you should keep yours high

Credit Scores: Why you should keep yours high

By Brian Anderson
Published: Friday, October 30th, 2009

If you have ever wondered why there are a lot of news and articles about credit score tips and credit ratings all around the internet and the financial world, this is for you.

Credit scores are the statistical method banks and other financial institutions use to determine if you will be able to pay back your debts in the specific time you have promised to do so. Credit bureaus, companies that are used by banks and financial companies to calculate your credit score, use different evaluation systems based on factors like outstanding loans, loan payments, credit card balances, mortgages, annual income, and other financial factors that can affect one’s ability to pay off debt. After their calculations, they release your credit score which is a number between 350 for extremely high risk and 850 for extremely low risk.

Five major factors are considered in the creation of your credit score and they are mostly unmentioned in credit score tips. These are previous credit performance, amount of current debt, time credit has been used, credit types available for use, and the pursuit of new credits. Of these factors, your credit performance and amount of debt are most important. Combined they stand for about 65% of your credit score. Credit performance is how you have, historically, paid off your debts and amount of debt is the total amount you owe to all financial institutions including all outstanding loans and duties.

The importance of credit scores can be seen when you are trying to get a new loan, mortgage, or event some service utilities such as mobile phones premium satellite or cable television. Your credit score will also influence how much “risk premium” or additional interest is imposed on you when you are able to get a loan. The difference between a good and a bad credit score can mean a difference of up to 4% in interest. Most of those who have bad credit scores are not able to take out any loans until they get a higher credit score. That is why employing the correct credit score tips is important.

Credit score is also very fragile and finicky, since there are a lot of factors that can affect it, sometime you may not even know that you are having a negative effect on it. For example, a single unpaid bill and for a credit card you have not used for a long time, even if the bill is just for the annual fees or for a very small amount, can lead to an extremely low credit score.

Here are some credit score tips for maintaining a good credit score.

  • Keep the minimum amount of credit cards – Banks think that if you have a lot of credit cards, you can generate a lot of high interest debt in a very short time if you use them all at one.
  • Loan payments should be paid on time and with the maximum amount possible
  • Keep you debt low.
  • Limit your number of credit applications and be aware of your credit types.

Credit score is an extremely important. By following these credit score tips and using some common sense, you can avoid the difficulties that follow a low credit score.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.