December 5, 2008
Is Your Credit Score Important To You?
By Student Credit Finance
As a college student your credit score is probably not as high as you would like it to be, knowing that you have the power to improve it is something you need to remember. The manner in which you have handled your finances plays a huge role in your current credit rating. This being said, if you have healthy finances, you will also have a healthy credit history and score. It does take discipline and dedication, but it is worth the effort, especially when you do reach a credit standing that will allow you to qualify for all types of loans, lower interest rates, and much, much more. I have outlined fine essential rules you need to adhere to always.
1. Simply pay your bills on time. - This can be the single most important aspect in determining your credit score, making up 35% of its total. Missing just one payment on any credit card or car loan can take 50 to 100 points off your credit score. If you miss an entire month’s worth of payments, your score will easily drop 100 to 200 points.
2. Paying down your debt and charge less in the future. - Creditors do expect a certain amount of room (gap) between the amount of debt on your credit card and your total credit limit. The more debt you pay off, the wider the gap and the better your credit score.
3. Do not automatically close older accounts you have paid off. – In the past this was the way of thinking. It has since been updated over the past few years The rule of thumb had been to automatically close a zero balance account to improve your score. The strategy now is just the opposite. When you do close an account, you lower the total amount of available credit, which in turn raises the ratio of balances (on your other cards) to credit limits. By closing those older accounts, you may actually be considered less creditworthy.
4. Try credit counseling. - Legitimate credit counseling agencies can help you improve your credit scores and situation.
A study conducted by the Fair Isaac Corporation, creators of the FICO credit scoring service, found that credit counseling clients were less likely to default on their loans or to declare bankruptcy than other consumers. And because a debt management program does require that you make on time monthly payments to your creditors, it eventually means a faster trip to an improved credit score.
5. Avoid bankruptcy. - What is the very worst thing you can do to your credit score? Declaring bankruptcy is definitely at the top. It can take 200-300 points (or more) off your score. Those who do file bankruptcy will then find it very difficult to obtain new credit, and once they have it will be at much higher interest rates then before they filed. A bankruptcy will generally stay on a credit report for a very long time, up to 10 years. And during this time it will be seen by everyone from lenders to landlords to employers. Basically anyone who has access to your credit report.
As you can see, your credit report and score are huge in your financial future. Starting off and playing the games with the right rules will only enhance your credit worthiness as well as access to the big dreams in life.
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