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Understanding More About Credit Scores and How to Improve Them

There are numerous articles that recommend the best ways to improve the credit scores of both individuals and businesses. Maintaining healthy credit has many benefits like having a better chance of receiving a credit card with a higher limit or obtaining loans.

Unfortunately, there are still many people who do not understand what a credit score is or some of the best ways to improve it. The fortunate thing is that you are reading the right article. Here, we will explain what it is and also tell you how to keep yours healthy. Read on to learn more.

What Is a Credit Score?

Credit authorities from different countries usually assign people a three-digit score that depends on their financial files. The number shows the calculated likelihood that a person will pay debts like loans, credit cards and bills among other things. The lenders and financial institutions are the primary users of the information. The higher the number, the healthier your score is and the more likely you are to receive a loan or line of credit. To keep it as high as possible, follow the tips we will share below.

Pay Debts on Time

You need to ask yourself why you have been failing to repay on time. Is it that you have been forgetting, or are you facing a financial strain? Well, reminders do work well for most people. They help you to stay alert that you have debts to clear at the end of the month. It is also a wake-up call to adopt proper financial management in your life. Paying debts on time creates a healthy credit profile because the lenders send such information to the credit bureaus. As a matter of fact, it is important to keep a close eye on your report to know where you are already. Sometimes, they may forget to submit the information that you need to improve your score.

Use Your Credit Card Carefully

Most people and institutions have one or more credit cards. Having one can build or destroy your credit score depending on how it is used. It is recommended that you avoid putting too much strain on your credit card. On the other hand, you cannot keep it unused. Only use your credit card when necessary and keep your balance as low as possible. This way, you show the lenders that you are responsible, and they use such information to improve your score. You can read more about how to improve your credit score at

Check Your Bills

This is where most people fail. They think that regular bills have no impact on the credit score. However, how you handle your regular bills determines your credit score to some extent. Paying bills on time is a plus because those sending the bills like utility companies usually send their reports on you to the credit bureaus. Set up reminders to avoid forgetting or postponing the bills past the deadline.


By now, you already know some of the best tips on how to keep your credit rating healthy. As mentioned earlier, you need to keep an eye on your report to know if the lenders are submitting all important information that would improve your score. Sometimes, incorrect information can cost you some points off your score, but if you complain, they will rectify the situation. Ensure that your score stays healthy at all times.By now, you already know some of the best tips on how to keep your credit rating healthy. As mentioned earlier, you need to keep an eye on your report to know if the lenders are submitting all important information that would improve your score. Sometimes, incorrect information can cost you some points off your score, but if you complain, they will rectify the situation. Ensure that your score stays healthy at all times.

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5 Ways Having Bad Credit Impacts Your Life

Do you have bad credit, but don’t see much reason to try and fix it right now? It’s not uncommon for those with a ton of debt or financial problems to give up or never start the process of improving their credit. The thought of spending the next few months or years living on a tight budget to pay off what seems like an impossible amount of debt is overwhelming, to say the least. Sure, improving your credit history is going to take some hard work and time, however, it can be accomplished. When you consider the consequences of doing nothing, you suddenly find yourself inspired to do the right thing.

Bad Credit Limits Your Borrowing Options

Let’s start with the most obvious consequence to having bad credit – your inability to get a loan. Loans can be very convenient for affording things you want and getting you out of a bind. There are plenty of loans you could consider, however, if you have a poor financial record, you can forget about getting approved by most lenders.

Side note: If you’re really in a jam and your credit isn’t getting you very far, there is the option to apply for alternative payday loans for bad credit. Although not as much cash as you could get with a traditional loan or the attractive low-interest rates you see advertised, it does provide relief. If approved you could receive as much as $1250 in your checking account the next business day.

Bad Credit Could Make it Difficult to Find Housing

Thought that your bad credit would only impact you if you were interested in buying a home? Although it would be challenging to get a mortgage with a negative financial history, that’s not the only form of housing that could become unattainable to you. As more landlords look for reliable tenants, credit checks are fairly common. A tenant who has a history of not handling their finances is a red flag and could get your rental application rejected.

You Can’t Get a Car with Bad Credit

If you have bad credit in a town where public transportation isn’t readily available, you’re going to be in a world of trouble. Getting approved for a car loan is an uphill battle with poor credit. Which means you’ll need to find a car you can pay for upfront with the cash you have available in the bank. Since most people don’t have thousands of dollars stashed away for a new ride, chances are you’ll be catching an Uber or Lyft around town until you’ve saved enough to buy your own.

Forget That Job if Your Credit Sucks

Why in the world would an employer need to know your credit score in order to determine if you’re a good fit for the job? While in some industries, like finance, if you’re unable to handle your personal finances, you probably shouldn’t be responsible for handling anyone else’s. Other employers review credit reports to get a good idea of the type of person you are. Are you responsible and trustworthy? A bad credit history may tell a different story.

Expect Life to Get Pretty Expensive

If not being able to get a loan, housing, buy a car, or land that dream job wasn’t enough of a blow to your life, then this next one’s a doozy. Those with bad credit will pay a lot more on average on things you need. When you have a negative financial history, you’re required to pay deposits for utility or television services. If you are approved for a loan, you’re going to pay a lot more in interest. Products like car insurance will automatically skyrocket. The list goes on.

You may have thought that having bad credit was no big deal. Perhaps, at the moment it isn’t. However, if you plan on doing any of the above-mentioned things in the next 7 to 10 years, you may want to do something about it. That means figure out ways to improve your credit and start adopting more positive financial habits that will set you up for a better future. If you’re seriously having trouble with debt, talking with a debt counselor or financial advisor can guide you down the right path.

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Fast Ways To Improve Credit Scores That Last Forever

improve-bad-credit-ratingThe first step to boosting your credit score to comprehend its basis of calculation. Major credit bureaus utilize a complex math formula called “FICO” to derive three-digit figures that literally dictate your financial fate as main determinant of lender approval and interest rates.

Biggest score impactors

FICO algorithms analyze basic credit file characteristics. In order of relative impact, these factors include: 1) Payment history; 2) Debt ratio; 3) Account age; 4) Account type(s) and, 5) Recent creditor inquiries.

Payment history holds primary sway with a whopping 35 percent say in your final credit score.  However, correction of its prior direction in a wrong turn is a long-term process requiring several years of prompt high-interest debt repayment. Thus, a far cheaper and much faster strategy is a starting focus on the second most significant factor.

Best credit score improvement = debt ratio reduction

Known variously as “credit utilization ratio,” debt ratio denotes balance owed in proportion to total available credit. The lower this ratio, the higher is your overall credit score. Fixing a high debt ratio requires self-discipline for strict adherence to the regimen outlined below:

Minimize vs. mobilize debt

Many people try to disguise a high debt load by consolidating several small balances into one or two big loans. FICO is not so easy to fool, however, because it assumes some usage of all available credit. Accelerate repayment to eliminate or negotiate to reduce debt for optimal results.

Inside secret of success

A little-known fact is that debt ratio fluctuates wildly within a single month. Such extreme volatility stems from wide variations in the way credit card issuers report account balances. Many banks report outstanding credit card balances as of the statement date rather than the due date. Therefore, even if you pay the full balance each month, your credit file will reflect an outstanding balance. As this is naturally bad news for your credit score, take your business elsewhere if current card issuer(s) report statement-date balances.

Right debt types make credit scores rise

Roughly, 10 percent of your credit score reflects the relative diversity of debts in your composite file.  Computerized FICO algorithms categorize accounts into four recognized types:  1) Installment; 2) Revolving; 3) Consumer finance, and 4) Mortgage.  The more blend in current bills, the more likely creditors will lend you money.  Your warm reception stems from highly favorable perceptions of financial responsibility from having a positive history of handling many different credit types.

Fine credit gets blessed by Father Time

Average account age accounts for about 15 percent of your credit score.  Although time never goes forward any faster than a watch, you can “borrow” a bit of credit history from family or friends. For instance, suppose your parents have made monthly mortgage payments to the local bank like clockwork for the last few decades.  If so, have a long talk to ask Mom and Dad for a helping hand by adding your name to the loan contract.

Once they happily agree and the bank has processed all necessary paperwork, a brand new “old” account appears like magic in your credit file.  Just be sure to do some quick math before you ask to verify that you were not a baby or toddler wearing diapers when Mom and Dad took out the loan!  Such a gross oversight just might raise eyebrows among prospective lenders and backfire with far worse results than instant rejection.  Fraud indicator checkmarks in credit reports and computer database blacklisting entry are merely the beginning of a lifelong nightmare!

Go slow to build great credit

Contrary to popular belief, quality has more positive impact on credit history than mere quantity.  Thus, you fare much better by faithfully repaying two accounts on time for 2 years than creating six new bills with different creditors for 6 months.  Such attempted cheating is self-defeating because it lowers the average age of all accounts, thus bringing down your overall credit score.  Moreover, even if you repay the entire balance on half a dozen credit cards every month, prospective lenders view too many open accounts as “overextended” and deny your application due to excessive obligations.

Bombard lenders fast for fresh credit

When the time is ripe to take on new credit, proceed with caution but all deliberate speed.  Credit scores lose a few points each time a would-be lender looks at your file. Moreover, a sudden blitz of inquiries in a brief span of time can haunt for up to 2 years by leaving behind shadows of doubt in lenders’ minds about financial stability.

Fortunately, however, human mathematicians who designed FICO are neither heartless nor naïve.  Instead, they readily perceived that consumer finance transactions typically evolve over days or weeks of applying to multiple creditors in a single market or industry sector.

Besides chronological time, FICO considers account type and creditor industry.  This means it is best to apply for specific kinds of credit from as few potential sources as possible as fast as you can.  An effective strategy to win the race for the best interest rate is to pull your own credit scores and contact lenders to prequalify before you stop by to apply.  Besides saving wasted time, this prevents dropping your scores by five points for the “privilege” of credit denial.

Begin practicing PRN borrowing

For the vast majority of viewers who have very little medical education, “PRN” is a Latin abbreviation with a loose English translation, “take as needed.”  Like doctors who prescribe pain medication, prudent consumers must take a PRN approach to credit management.  This means taking on no more new credit than necessary to fill legitimate needs at lowest cost.

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