A credit score is perhaps one of the most important factors that affect our financial life. We always hear that we need to keep our credit scores high, and to do this we need to know the factors that affect our credit ratings. In this article, FreeScore360 will discuss what can help your credit scores and what affects your financial reputation report negatively.
Why Does Having a Good Credit Score Matter
Many people make several financial mistakes that end up hurting their credit scores often due to lack of thorough understanding of why does having a good credit score matter. Our credit scores are used to determine three things:
Credit Score Dictates Your Loan Application Approval
Whether our loan applications will be approved. Our financial rating report dictates if our loan application in several financial institutions can be approved or not. High credit scores will often give you more chances of having approved loans with good terms. Having bad credit scores sends out the message that you’re not good at handling your finances and that there’s a high risk of you not fulfilling your end of the bargain.
It Affects Your Interest Rates
How good the terms of our loans can be. Some people say that you can get approved for loans even if you have bad credit scores. Yes, that’s true, but your loans will most likely have absurd interest rates that will push you even deeper down the financial trouble rabbit hole instead of helping you get out of it.
What Affects Credit Score Negatively
1. Late Payments
Your credit score is hugely affected by your payment history; in fact, it’s thirty-five percent of what affects your credit score and report. Consistent late payments will hurt your financial reputation, so you need to make sure to pay your credit card bills and other loans on time to keep your credit score healthy.
2. Having Creditors Charge off Your Account
Creditors only charge off your account when they think that you’re not going to pay your credit card bills at all. And this happens due to past patterns of behavior when you miss to pay your credit card bills. Nothing sends the message that you can’t be trusted with credit stronger than this.
3. Defaulting on a Loan
Loan default happens a minimum of one month after missing your payment, so this means you have plenty of time to settle your payment or talk to your creditor if you think you can’t make the payment on time. If you know you’re running the risk of defaulting, be proactive and talk to your creditor to find a way to avoid having a default record on your credit score and report.
What Can Help Your Credit Score
So what can help your financial reputation gain back its good standing? There are basic things you can do to keep your credit score high: pay on time, communicate effectively with your creditors, and don’t max out your credit bills. The key here is to always stay on top of your bills. If an emergency happens that will prevent you from paying off the loan, strike a deal with your creditor as soon as possible.
These are just some of the primary factors that can hugely affect your credit score and report. It’s important to always keep in mind what affects financial record reports negatively so you can take appropriate measures to keep your credit score at a good status.