Improving your Credit Score
Oystr Finance LTD (Techstars ‘22)
Credit infrastructure for emerging markets.
Folarin, a businessman, recently decided to take a loan from a reputed bank, but despite higher income, his loan application gets rejected. He seems to be confused now about the reason for such rejection. There could, however, be multiple reasons for loans getting rejected. Because your income is not the only criteria financial institutions look at when they consider your loan application.
One of the criteria, if not the main, remains your credit score.
What is a Credit Score?
A credit score is a numerical representation of an individual's creditworthiness. It's a three-digit number that summarizes a person's credit history and helps lenders assess the risk of lending money to them. Credit scores are used by banks, credit card companies, mortgage lenders, and other financial institutions to make lending decisions.
Tips on Improving Your Credit Score:
If you want to boost your credit score or maintain a good one, consider these tips:
1. Pay Bills on Time: Consistently make payments by or before their due dates. If your repayment date is set for any particular dates, try making payments before the due date to improve your credit score.
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2. Tackle past debts: If you have outstanding balances, prioritize clearing them. Start with smaller debts and work your way up
3. Don't Close Old Accounts: Keeping old credit accounts open can positively impact your credit history's length.
4. Diversify Your Credit: Consider different types of credit, but only if it makes financial sense for you.
5. Monitor Your Credit Report: Regularly review your credit report for errors and discrepancies. You're entitled to one free credit report from each of the three major credit bureaus annually.
6. Seek professional help: If you're struggling to improve your score, consider consulting a financial advisor or credit counselor. They can offer personalized guidance and solutions.
In Conclusion:
Your credit score is a vital financial metric that influences your access to credit, interest rates, and even some life decisions. Understanding how it's calculated and how to maintain or improve it can significantly impact your financial well-being.