Many of us remember that our fathers and grandparents comment on the use of credit for our purchases as something close to blasphemy. In recent decades, the dominant attitude in Central America has been “if you can’t pay for it, you shouldn’t buy it”. In today’s complex social and economic environment, maintaining a good credit score has become crucial for the home, the family and the ability to function effectively in everyday life in general. It’s not just about financing purchases, but also about increasing employment opportunities, social status and financial management.
Exactly how credit bureaux (Experian, Trans Union and Equifax) actually calculate credit results is a mystery to everyone. Each of them has its own formulas, which seem to be beyond mere understanding. Although offices do not disclose their formulas, directly speaking, they provide concise information on how to maintain and improve performance and how credit patterns affect performance. Below are some tips on how to maximise credit performance.
How credit reporting works
The consumer should understand that bureaux evaluate only bills that are reported to him by the consumer’s creditors. If the credit account is reported to Experian and Equifax, but not to the Trans Union, this will not be reflected in the Trans Union credit assessment. This is the main reason why there are often significant differences in scores between repositories (offices). When consumers apply for credit, the creditor can rely on any of the three points in the office or on all three, as in the case of a mortgage application. It is therefore important that a score significantly lower than the other two points is agreed with the repository. Often, a lower rating is the result of failure to report credit accounts with a good payment history to the repository.
Late payment in any consumer account can have a serious impact on credit rating. Delays are defined as delays exceeding 30 days. Payments received by the creditor with a 60-day delay and later have an even greater impact on the result. Once arrears have been reported, they remain in the consumer’s credit register for seven years. However, over time, overdue payments will have a lesser impact on scoring if the creditor does not report further late payments.
An excessive number of credit card accounts, regardless of payment history, can also have a negative impact on credit performance. Offices do not chronicle payroll information, employment stability or anything directly related to income. Consumers with more than three credit card accounts raise the red flag of potential debt escalation, even if the cards are not used. Credit history is also an important factor in the scoring. Accounts with a good balance of payments should not be cancelled. Instead, you should cancel newer credit card accounts because they have less impact on the result.
Accounts that have a high debt balance or come close to the credit limit have a significant impact on your credit score. Transferring part of the balance of the debt to another credit card with zero or low balance could improve the result, but the best solution is to secure a relatively low-interest bank loan in order to repay the debt of high interest rate credit cards. Check out Scott And Terry website, and read what he said more about credit scoring.