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Make Payments On Time And Get A Good Credit Score

When a person goes to a bank or lending institution to have a loan, they check his credit history first. Credit scores tell the story of how regular and punctual you are in making repayments. A person with a good credit score will always gets loan approved quickly, that too with lower interest rates. On other hand, a person with a bad credit history will find it difficult to get the next loan, or he will be offered the loan with high rate of interests.

So, you must how to get a good credit score or if you have a bad credit score, you must know how to clean up and improving it. For this, you must have some about how credit scoring is done.  In the US, all credit history is maintained by ‘Fair Isaac Corporation' or simply FICO.  It gathers loan information from the three biggest credit bureaus:
1. TransUnion
2. Experion
3. Equifax
FICO uses this information to assess credit worthiness and send this information to lenders, banks and credit card companies.

Any body can get the complete listing of his credit history from FICO if he wants. This information can be used to apply new loans or in the case of any discrepancy in entries, you can challenge the lender. The range of credit scores given by FICO varies from 300 to 850, where 300 stands for bad credit history and 850 for perfect score. The bench marks is generally kept at 600. Any score above 600 is considered as favorable and below 600 as poor.

FICO will make assessments based on:
1. Payment history
2. Amount owed
3. Period of credit history
4. New credit
5. Type of credit
Each factor accounts for 35% of credit score history. For more details on how the scoring is done. once can visit the website dedicated for the purpose.

Having a good credit score means a potential borrower is viewed favorably by lenders and offered attractive rates of interest on new loans or higher credit card limits.  Clients with good credit score are considered valuable customers and are treated with great respect.  Borrowers can do their part to maintain good credit score by making all loan payments on time.  If they default on loan payment or miss scheduled payments regularly, their credit score will go down and they will find it difficult to get new loans sanctioned.

 It is not just the late payment that brings your credit scores to go down, there are a few other factors some other factors too to consider. Length of credit history accounts for 15% of credit score hence, youngsters with fewer loans will have a better credit score.  To improve your credit score you must avoid periodically closing old accounts.  For example, if you one of the credit cards is hardly used, do not close it. Lenders can treat it as a longstanding credit history. The more the credit inquiries, the lower the credit scores. Lenders may then consider you plan misuse money.

However, you must go through your credit history report frequently to make sure that there are no discrepancies or identity theft, which is a common problem for credit card users. People suffering from major debt problems file for bankruptcy, hoping to start afresh, but this can lower credit scores by as much as 220 points besides being on your credit history for at least 10 years.  If you find your credit report is unfavorable, don't panic, try to be regular from then on as FICO scoring recognizes and rewards good behavior – i.e. recent timely loan repayments – and will compensate bad previous history.

There is a few more ways to clean up and improve poor credit scores apart from being regular in repayments. One of them is to contest wrong information by appealing to the credit bureau.  The bureau in turn will ask for proof from the credit company and if they fail to provide this in 30 days, the entry will be removed from your credit history.  Credit reports are automatically updated every 7 years. So, take all the measure to make sure that you maintain a good credit history that will let you have new loans at attractive terms.

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