Your credit score is a very important factor in evaluating your financial performance. It is like your financial report card. It reflects your ability to handle your credits. Thus to get a good credit score you will have to handle your credit cards and other secured and unsecured debts properly. It may occur to you that why is it important at all to maintain a good credit score? There is not one but multiple answers to this question. Maintaining a good credit score means you are able to handle you debts well. That is, you make your monthly payments on time and don’t default on your debt. However, if your debt payments are irregular and you have defaulted on your loans, your credit score is affected negatively.
What is the importance of credit score?
All lenders will look at your credit score before lending you a loan. The higher your credit score is, the better is your chance is to get a loan at suitable terms and conditions. Whether it is a mortgage, a car loan, a new credit card or any other type of loan, the lender will charge you a high rate of interest if you don’t have a good enough credit score. Sometimes lenders even refuse to lend you a loan if your credit score is too low. Your credit score even matters when you apply for a new job. It is a reflection of your creditworthiness and your responsibility towards personal finances.
How to improve your credit score?
You should try your level best to improve your credit score by taking various steps. These steps are evaluated below.
1. Pay your bills on time – This is the foremost criteria for maintaining a good credit score. You should try and pay off the balances on your credit card every month. This is especially applicable if you are using multiple credit cards. Keep the balances well below their limits.
2. Take out small loans – Your credit score increases as you show your creditworthiness. The best way to do this is to take out loans of small amount and pay them back in full within the time period. In this way such activities will be reported to the credit bureaus by your lenders and will add positive information into your credit report which will in turn increase your credit score.
Therefore, you can follow the above steps and maintain a good credit score which is important for your financial stability.