How To Develop And Maintain A Good Credit Score

Good credit score ratings can help you obtain any credit you need for a business or for your own home and lifestyle, although it is vital that credit should be used correctly. When the economy was in boom times and money was plentiful, the lenders were quick to make loans available to people who were really not a good credit risk at all, and this has led to inevitable trouble for everyone now that there has been a severe downturn. Using credit wisely can help you avoid all of these market driven problems and make credit a positive feature in your life.

If your goal is to build up a healthy credit score, the first step you need to take will be to understand the system as well as you can. There is an algorithm which is used to assess the likelihood of any individual being able to repay any money which may be loaned to them. This algorithm is relatively crude and simple, and it is certainly not a trade secret. The percentages of the score which relate to each area of your life are well known, and are published on free Internet sites. From these percentages, you can assess where you can make improvements to your score over time.

Within these percentage areas, incidences are reported back by the lenders every time a repayment is made successfully, or made late, or simply not made at all. This reporting is then there for anyone else to see if they need to make a search of the file to assess credit worthiness. The first obvious key to building up an enviable credit score is to make sure that every repayment bill you have is paid on time, every time. If your budgeting skills are poor, they will need to become exceptional if you ever hope to build a high credit score.

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The credit scoring system is controversial for many reasons, not the least of these being that it is easy for someone to game and manipulate if they know how it works. This can only happen if you have already built up a reasonably good base which will allow you to qualify for credit cards and loans. If you obtain credit cards, you can use them for every purchase you make and then pay back the money with the cash which you would have used for the purchase in the first place.

This will mean that you are continually adding repayments to your score and forcing it higher. It will also mean that the credit card companies will start offering to increase your limits, giving you the ability to create an enhanced revolving line of credit. As long as you make sure that every amount of money you borrow is repaid immediately, there is no charge incurred for having these facilities. From this point, your efforts will gather momentum and you will soon find that you have an excellent credit score.

It is often maintaining a good credit score which proves to be the greatest challenge, as there are many potential problems which can stand in the way. There are thousands of people who had good credit ratings, only to see them decimated as a result of losing a job or having a business go under. This is why risk must always be assessed and kept under control, even during times when there are no obvious threats to your income or your stability. Your mortgage should be the only large debt that you build up, and even that should be kept under control by your ability to sell the property and pay it off. This is the way you maintain a good credit score.

 

 

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