IMPROVE CREDIT RATING

Before you may want to know how credit rating is calculated, you must also know what a credit score is. Your credit score is a points system based on your known credit history. You need to be very careful, not to mess up your credit history with bad credit.

Although it is found in many cases that, it is not too difficult to put up up a bad credit history that will lead to a bad credit score. The reasons leading to bad credit and low credit scores can be any of these:

* Any missed payments on borrowings i.e. mortgages or loans
* Any fake details on credit applications
* Not having any payment records, just as those new to credit – without proper credit history

The worst scenario faced by debtors with bad credit score is that you may consistently find yourself turned down for credit. This is because, whenever you apply for credit with a store or a credit card company they will check your ‘credit score’ via one of the credit reference agencies.

But you must be definitely willing to know how credit rating is calculated. Here’s an insight:

Payment record

The basic thing about calculating credit rating is that, those who pay their bills on time will always benefit when it comes to credit rating; since a record of bills being paid overdue will have a negative impact on your credit score.

Debt Control

Creditors also ensure that clients are not forced to lead a life beyond their means. The estimate made by experts suggests that under ideal conditions non-mortgage credit payments each month should typically not exceed more than 15 percent of your income after tax. Therefore, a better credit rating goes in favor of those who manage to spend within this equation.

Responsibility and stability

Creditors or lenders stress to consider things such as permanence in the borrowers home and job, a minimum of two years; as signs of stability as well as responsibility. Credit rating has also been seen influenced by a borrower’s respectable profession.

Re-Aging

You can also dramatically improve your credit score by re-aging. You can implement the process called re-aging in which a credit history is re-written to be given a fresh start on the same account.

Credit inquiries

You might insist on setting inquiries or a notation on a credit history file. Too many inquiries may or may not have an adverse effect on the credit score. However, it is best advised not to initiate too many credit inquiries to minimize the chances of an adverse effect.

The credit rating formula typically looks at the difference between the amount of credit you have and the amount that is being used. This reduces the total credit and can make the balance carried seem larger and therefore take points off the score. Also, to maintain your credit rating at good levels, make sure that you avoid letting companies access your credit history when there is no need to do it.

Related links:

FREE copy of Experian credit report

Equifax Triple Protection Watch