Taking Responsibility Of One's Credit Scores

Credit scores are not something people can simply take for granted

. There are a lot of adverse consequences of having low ratings. On the other hand, there are several benefits of being favorably evaluated.

Grades are basically indicators of people's creditworthiness. Those who enjoy good ratings have the benefit of obtaining bank loans much easier and at lower interest rates. On the other hand, people assessed poorly have a harder time having their loan applications approved, and are often charged higher borrowing costs.

Scores are calculated by so-called credit bureaus. They use various supporting information and a standard set of criteria in making the computations.

A responsible individual knows he has to keep healthy ratings, understanding that doing so will make him reap benefits in the future. There are three ways to manifest responsibility over one's grades.

One is to fully understand how these numbers are arrived at. The three-digit figures are computed based on a set of criteria, including payment history, amount of existing debts, credit lines used, and length of payment history, and new loans.

People who pay their bills on time are rated favorably over those who are delinquent. Banks as well as other lending institutions will be more willing to extend loans to people who have good payment records because they believe that they will also settle their future obligations promptly.

Meanwhile, those who have mounting debts are evaluated poorly. This is because they are not likely to afford paying other loans that they may still want to secure.

People who maintain various accounts may also be rated favorably, but only if these lines are being properly serviced. It is good for individuals to maintain several accounts as long as they are sure financial obligations that are involved are promptly and religiously attended to.

Another way to manifest responsibility over one's ratings is to engage in an active credit monitoring program. This is done by asking for copies of reports made by evaluating firms on a regular basis.

Once an individual obtains copies of reports from any of the three major evaluators, he may check for potentially erroneous information that was used a basis in computing the grade. For instance, evaluators may erroneously have recorded that a person has not been paying his monthly electric bills on time when in fact he is. Rectifying errors are necessary to help improve one's standing.

Although it is the evaluators that make the grades, it is also the responsibility of individuals to check the accuracy of the grades computed by evaluating firms once in awhile. Doing a check once every six months is a common advice of scoring experts.

by: Leo Chu

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