10 Questions That Will Determine How Credit Smart You Are
There is a lot of advice we keep getting regarding the usage of credit cards, how to maintain the highest credit score possible, what to do and what not to do. No matter if you are trying to build credit history for the first time or want to alter your credit standing, the only key to have high credit scores is wise credit. Here are some of the questions that you should ask yourself to find out how much credit smart you are.
Q: Do you ask your credit report and credit score?
A: Your credit report is easy to access that can help you review your credit score and improve it, in case if it is low. You should check your credit report at least once a year to have a look at what effect your purchases have on your credit standing. You should keep a check on your credit score because it reflects the risk of doing business with you.
Q: Do you have some credit or no credit?
A: Credit history shows the creditors how you manage your debts. It is always advised to have some credit if not too much (than no credit). Because if your credit history is blank, then creditors will not be able to make lending decisions.
Q: Do you provide complete, accurate and consistent identification on your credit applications?
A: By providing correct information will help you build your credit history properly from the beginning. It will link up all your accounts and will minimise the chance of any incompleteness in you profile.
Q: Do you ask for a lower credit limit?
A: In case you are not able to control your spending limits, asking for a lower credit limit will surely help you. But, better to inform, your credit score is approximately based up to 30% on the credit you have. That is, shows how much percentage of credit you have, which is also called as credit utilisation ratio. So in case you are unable to repay on time and asking for a lowering in your credit limit; it will damage your credit score. It is better to have limitations on the urge of transactions.
Q: Are you paying off an instalment account early?
A:. Paying debts early might seem an attractive option to maintain your score, but in cases of car loan it is better to pay fractionally otherwise it will increase your credit utilization ratio.
Q: Are you settling a debt for less than you owe?
A: Settling a debt partially by negotiating with the lender can be a smart move but it can affect your credit score if you don’t get it on an agreement in writing. It might sound as a small distinction but it can affect your credit score even if it shows settled debt.
Q: Do you pay your bills on time?
A:. Delinquencies in paying your bills can affect your credit score substantially. Such delays will make them sure that you will pay loans also the same way.
Q: Do you plan to cancel your credit card?
A: Closing a credit card might seem tempting considering your spendthrift nature. But it is always said never to close your credit as it will ding your credit score because it will reduce your revolving utilization. The only time you should close your credit card should be when the annual fee or the interest rates are extremely high.
Q: Do you have a mixture of credit types?
A: A mixture of credit types will help the creditor know your ability to manage your credits. Holding a diversified profile of credits will let creditor know that you are responsible enough to manage your liabilities.
Q: Are you not using your credit cards at all?
A: You might be thinking that if you don’t use your credit cards, you will be safer side on your credit scores, But this is not actually the case. If the creditor checks your credit history and if he finds that you have not undergone any activity with your credit card, he can terminate your credit line. This will affect your utilization ratio and consequently your credit score and credit report.
Are you guilty of any of these issues? That’s OK, we’re here to learn and get ourselves Credit Smart. Make the changes you need and you’ll be well on your way to a beautiful CIBIL score.