We are surrounded by people who have different lifestyles, privileges, wealth, education, and knowledge. When we see a person with more potential than us, we always aspire to be like him or her.
Example- Today, if you have a small apartment and your subordinate has a big bungalow, you aspire to purchase a bungalow. But you can’t afford the bungalow with your current saving and salary. Under such circumstances, you need credit.
It is just one simple situation, and in the whole lifespan there occur various such instances when a person desires to have something but due to a limited amount of cash and saving his/her dream remains unfulfilled.
How is the Credit Score calculated?
Most of the people are unaware of their credit score, how it is calculated, and how each transaction made in the history affects it. For a common man, it is essential knowledge to have as it helps a lot when a person applies for a loan.
A credit score is a three-digit number calculated based on the history of transactions made by a person. There are various components to be looked at while calculating a credit score, but let’s have a look at the five most important ones.
A credit score is calculated by the following important factors-
- Payment History: If you miss a utility payment or paying a credit bill, it affects your score negatively, but the timely payments help you increase your score. The frequency of timely payments and missed payments are important in credit score calculation. The number of bill payments that are missed recently is also one of the important factors.
Suppose there are two loan applicants, and the bank can offer loan to only one candidate. It prefers the person who has missed the payments in the remote past than the person who has missed payments recently. This factor makes up a third of the total contribution made by the rest of the four factors. Hence, it is the most essential component.
This implies that you should make timely payments of your bills. You should not delay or miss payments because of your negligence, carelessness, or insouciance.
- Total Debt: The next important variable is the total debt on the person’s account. It is calculated by considering all the accounts. The score calculating agency considers all the accounts held by a person and keeps a note of the types of accounts. It sums up the credits available in all the accounts. After this, itsums up money that the person owes to the bank or any other lending organization. This also includes the payment owed in credit cards. After making all these calculations, they gauge the difference between credit and debt. The more the value on the debit side, the less is a score.
This calculation also considers credit card limits. If a balance is high on the credit card and it has reached its maximum limit, it will negate the score.
People usually make transactions with credit cards without knowing how it influences their credit score. The excessive usage, and the usage beyond the paying limits,deteriorate credit scores. So, beware of misusing credit cards.
- Credit History Duration: This is the third most crucial factor for calculating your credit score. Most people have this misconception that by avoiding credit card they are improving their scores.
No! This is not true!
If you maintain credit history for a longer duration, it will be your plus point.
What is the reason behind it?
Because if you don’t have any credit history, it means there is nothing for an agency to review in your transaction history. On what basis will they judge the timeliness of making payments. So, if you are avoiding credit cards to just improve the score, be aware that it is not the correct decision. Instead, you should have a credit history of timely bill payments.
- Account Variation: The various accounts held by a person adds to the credit score. Try to have a loan account, a retail account, a credit account, etc. But again you have to ensure the timely payments. You should maintain a minimum balance in your accounts. It helps you get a decent score.
- Recent Credit Transaction: Reading the above point might make you wonder that if you don’t have many accounts, opening one before applying for a loan would be helpful.
But the answer is No!
Opening up too many credit accounts in the recent past showsthat you are in some financial trouble. But if you hold so many credit accounts for a longer duration and make timely payments, it might increase your score.
How does a good Credit Score help you?
By now, you have a better understanding of how a credit score is calculated. And with further reading, clear your concepts on how a good score can be beneficial for you.
A credit score plays an important role in your financial life. When you just cross your teenage you may aspire to purchase a branded mobile phone or a sports bike.
Are you thinking about doing a post-graduation from a reputed college? Are you looking for student loan services?
After your marriage, you may have a dream to visit the most luxurious hotel with your partner for a lavish dinner and a night stay. Or you might think of opening up a business. You might also desire a luxurious car or a house of your own.
For accomplishing these dreams, you need money. But in most cases, people cannot afford it. Then the person thinks to apply for a loan. After submitting the loan application, the lending agency looks at your credit score.
If a person has a good credit score, the agency approves the loan immediately and offers loan at a lower interest rate. But if the person has a medium credit score, then the person gets the loan at a somewhat higher rate of interest. Lower credit score makes you pay more dividends. In some extreme cases, the agency also rejects the loan application. And this rejection of loan application shatters your dream.
In a nutshell, a decent credit score has a role to play throughout a person’s life. A student can secure admission to a good college and can pay the fees with a student loan. An entrepreneur can invest to establish his business. A newly married couple can buy a car, a house, or an opulent vacation for themselves.
How you Improve your Credit Score?
You should not be worried about your bad score even if it is lower than the bank’s threshold limit. Most of the people have limited financial knowledge. All times are not the same in a person’s life. Difficulties are the part and parcel of a person’s life. At some times he may have an abundance of money, while at other times he may fall short of money. It is good to accept the challenges of life and enjoy the life by overcoming these challenges. Old people used to say ‘where there is a will, there is a way’, so don’t be sad. There are options to improve your credit score.
Let us now understand how one can improve the credit score.
- Monitor your credit Score– Keep checking your credit score online even when you don’t require a loan. With this, you will get to know about your credit ratings and the factors responsible for lowering and increasing your score. This provides you with a fair idea of potential risk factors. And from then onwards you can work on transactions that help you improve your rating.
- Credit Utilization– Credit Utilization is defined as how much credit you are using out of the total credits. For example, the credit limit on all cards is $1000 and on average you do the transactions of $100 monthly, in such a scenario your credit utilization is 10%. Ensure to keep credit utilization as low as possible. Don’t use your credit cards excessively. You should try to minimizethe credit card use. This helps you to improve your scores.
- Pay on Time– Try to make your payments on time- be it any utility bill or a credit card bill or a loan payment. Always ensure that you make timely payments. As we have read on the top, making atimely payment is the most important component and contributes maximum in a credit score calculation.
- Don’t apply for multiple credit cards– To decrease the credit utilization, you might think of applying for extra credit cards. But it is a risky step. Yes, your credit utilization reduces on one hand, but it adversely affects your credit score. It raises hard inquiries on your account which may last up to 2 years.
- Don’t close unutilized credit cards– As long as you have a credit card and you have not used it and it is not charging you annual fees, keep it open. This is the wisest strategy. But if you close a specific account but owe the money in other accounts, your credit utilization increases and this affects credit score negatively.
- Don’t Open New credit accounts unnecessarily– You should open an account only when you are in need. If you have too many credits, it shows that you are in trouble. It raises inquiries on your account.
- Dispute inaccurate queries– Examine your credit report. Verify all the accounts listed in the report. If you see any discrepancy or derogatory item on your credit report, get help from a credit repair specialist.
What role does 007 Credit Agent play when it comes to credit repairing?
We help you challenge the negative information on your report and to establish a new positive credit score. We are locally owned and provide the best credit repair services with our expert agents and dedicated staff. We help you secure a good credit score with which you can apply for a loan at a much lower interest rate. We offer services at a nominal fee with no long-term commitments.
Our credit experts analyze your report, consult with you to discuss a customized and best suitable action to reach your goal. Our team provides the best solution that works for you. Our bottom line is to increase your topline. Such work often takes some time to reach the goal, but we can assure you that within 90 days you can see changes in your ratings. Although it is difficult to guarantee the time duration because each person has a different report. Our team guides you to establish new positive accounts and payments with credit bureaus. 007 Credit Agent has a partnership with a lender that provides a guaranteed and secured credit card approval. As long as you are not in an active bankruptcy proceeding, it will approve you!
Do you need your credit score report regularly? We provide you all three major credit reports and that too at a discounted price.
If you are going through a tough time in your life, don’t worry at all!
Our agents provide you financial education to manage your credit throughout your hard times. There are ways out to manage your credits efficiently during hard times. Some tactics can save your money and save your credit scores during financial fallback. To save yourself amid financial trouble, get help from one of our credit experts.
With our guidance, you need notworry about the pesky debt collector’s phone calls. It is your legal right to protect yourself from the unscrupulous debt collection practices. Many times, you can cease collection activities because debt collectors don’t comply with consumer protection laws.
The FICO credit scoring model puts a significant amount of emphasis on the ratio of your credit card balances to their limits. If we enroll you in our credit repair program, we will manage the dispute processes on your behalf, but if you want to see your scores improve, start reducing your revolving balances.
Just to give you a flavor of our other services- we provide debt validation requests for collection letters. We offer goodwill letters for late payments. We also cease and desist letters.
If you need more information, visit our website- https://007creditagent.com/.
You can reach us at info@007creditagent.com.
We are available on call at +1 949-258-7026.
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