All About Credit Scores
Credit Scores are a three digit number that indicates the ability of a person to repay his debts. It represents the creditworthiness of a person. Banks and other financial institutions who lend money to the borrowers use this to decide if the loan has to be granted to a person. The preliminary process of sanctioning a loan to a borrower also includes this step of ascertaining the repaying capacity of the borrower. This step is of prime importance as the number of NPA’s in the banking sector is seeing a steady rise.
How is the credit score generated?
The credit score typically ranges from 350 to 800. The score is ascertained by the use of different models. The higher the score the greater is the creditworthiness of the person. The creditworthiness of a person depends on the history of his payments. If he has a fair credit history he will be assigned a higher credit score. The score is strictly dependent on the person’s payment history and does not take into account personal attributes such as race, gender, religion, marital status etc
What are the benefits of maintaining a good credit score?
Credit Score is an important factor the lenders take into account while dispensing loans. A good credit score can earn low-interest rates, higher credit limits, flexible repayment period etc. This is definitely beneficial to the borrower as it means that the borrower will end up paying less for any line of credit.
How to improve your credit score?
A credit score is dependent on the how you utilize the credit that is available to you.
- Maintain a good payment history – Timely payments are an important factor to ensure you have a good payment record. On-time payments of bills for a period of 6 months are required to see a noticeable difference in the credit score.
- Increase your credit line – If you have credit card accounts, you can ask for an increase in the existing limit and keep a good portion unused. The unused portion of the credit will also earn you a good score.
- Refrain from closing a credit card account as it might adversely affect the credit score. Instead, you can simply stop using the credit card.
Credit to you will definitely be at lenient terms if you have a favorable credit score. So it is in your best interest to maintain a good score. Also one can try Cryptocurrency trading to enhance one’s financial prosperity. Try trading on Ethereum Code to realize the benefits of automated trading systems. Read the Ethereum Code Review before you start trading.