Financial Freedom Expert

People have many fallacies about credit scores as they believe that their credit scores does not matter their credit history or that they do not have any credit scores. You need to be aware of these misconceptions as it might hurt you in various ways in the future, be it in securing a job of your choice, getting a good interest rate for any kind of loan or even buying a home.

The fact is that if you have a bank account and have been using it for clearing bills, then you will have a credit score. It is very important to keep track of your credit score which might be have many names like credit risk rating, FICO score or FICO rating, credit rating or a credit risk score. All these indicate the same thing. Credit scores are three-digit numbers which are provided to you and which help lenders to evaluate your financial condition and your ability to handle your finance as well as repayment of your bills. Your credit score is checked every time you apply for credit, buy a new house or apply for a new job and higher the number better would be your interest rates as well as getting suitable credit. Minor mishandling of the credit can affect your credit score drastically.

Though it would take some time to bring about considerable change in the credit score it is important you follow certain tips to improve your credit score and start doing it immediately instead of postponing for a later period when you want a decent credit score for various commitments like buying a house or a car. Some of these do-it-yourself ways are:

1. Ask for a credit report annually from the credit bureau and check for any kind of discrepancies. In case there are mistakes, immediately get it rectified by sending a request in writing.
2. Do not divulge your identity to all and be selective. This will help in avoiding any kind of fraud on your credit report.
3. Credit score gets affected if your application for credit is rejected. So be selective in filling applications for credit and do so only after checking its credibility.
4. It is also better to distribute the credit card balance among your credit cards if you have multiple cards as the credit score will improve if you have balance lesser than 30% of your maximum limit in each of your credit cards.
5. In case you are planning to close a particular credit card account, retain the oldest one as the duration of your credit history in it will help in improving the credit scores. It is better to project an older credit card with lesser balance rather than one which is new with more balance.
6. It is better to have all the bills in your name and ensure that the payment is done promptly and on time.
7. If you are likely to miss a payment or are unable to make full payment, then it is important that you contact the company prior to the due date to avoid a bad credit report.
8. If you have missed payment of some bills, make sure you clear all of them at the earliest. This will improve your credit score considerably as while offering credit the lenders would check the payments done during the last few months.
9. If you are in a severe financial crisis, then you need to seek the assistance of credit counseling. Finding an alternative solution to solve your problem would be a better idea than to file for bankruptcy as bankruptcy would make you lose hundreds of points of your credit score.
10. You should also ask for your credit limit on your credit cards to be increased as it will help in improving your credit score as about 30% of the credit score is based on the ratio of the amount you need to repay back to the credit offered to you.

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