The best thing that can be said about credit scores is that you can at least expect a new figure once the next credit report is ready to be published. Credit scores are quite inconsistent from one report to another because they are based on your most recent activities.
Here is the problem, though: a lot of your transactions are utterly dependent on your credit score. Get one too low and you’d find out that a lot of your credit applications would be rejected, among several other things. So, it makes sense to at least find ways to stabilise the trend of your scores. To do that, it’s best to get a grasp on some basic concepts first.
So far, we have been talking about protecting your score or improving them. The one thing that has not yet been discussed is what a good credit score actually looks like. Regardless of the credit agency you are assigned to, credit scores are based on a range of 3-digit numbers arranged in ascending orders.
At a glance, you can quickly see that creditors and businesses favour 4 out of the 5 ranges. A credit score of 800 will give you a lot of perks such as immediate approval of your applications and even interest-free options (this one’s on a creditor to creditor basis, though). This might even help you in looking for a job as employers tend to do soft searches on a job applicant’s credit score to look at their financial history.
On the flip side, having a poor credit score is going to impede you in a lot of ways. Potential landowners might want nothing to do with you, creditors would outright reject your applications, and interest rates are going to make it hard for you to clear your debts. As far as mortgage is concerned, a poor credit score might not shut you outright from applications but your loaning options would be limited.
It’s important to understand that a credit score is simply your reputation as a credit holder reduced to 3 numbers. It tells creditors if it’s okay to lend you some credit or not. With that in mind, every creditor affixes to them a starting point from which they work their way up or down.
Depending on the agency, you might get a rating of 580 to 700 on your first report. This is quite a solid place to start as you have established at least some sense of trustworthiness for most creditors.
However, this assumes that you actually have good credit management skills right from the start. As such, it is unheard of for first-time creditor holders to get a poor rating especially if they manage to accrue a lot of debt and made a lot of mistakes within a short period of time.
Once you’ve reached a certain desirable rating, the next best thing to do is make sure that it does not drop beyond a range. It’s hard to actually maintain the same numerical score so your goal is to make sure that it falls within a certain rating range for the sake of consistency.
There are a lot of ways to do this but the most important ones cover a handful of major aspects.
The most direct thing you can do to keep your score safe is to make a history of good payments. Depending on the credit agency, payment history can make up either 30% or 40% of your credit score which makes it a huge factor in improving your overall rating.
To stabilise your credit score, it makes perfect sense to make healthy financial habits. As far as debt is concerned, your habits should include:
Paying On-Time – Whenever you accrue debt, you are given a timetable to settle it. This could range from a few weeks for small loans to as much as 24 months for huge ones. In this regard, you must show your ability to take down a portion of your balance every billing period by paying on or before the due date. As a matter of fact, paying on or before time can yield you several benefits which will be discussed later.
Paying More – When you opt for an installment basis on payment, you are given a minimum amount to be paid on a regular basis. Although it does not hurt to pay the minimum, a better option is to actually go beyond the minimum every billing period.
The reason for this is that your balance will actually play a role in computing your credit score. The higher your balance is once a report is being prepared, the lower your credit score will be. If you can find ways to cut down on that balance as quickly as you can, your credit score will not only remain the same but might even improve.
Paying Often – Frequency in payments will help you in two ways. First, double payments can help on reducing your balance which might influence your credit score as much as the credit utilisation ratio is concerned. Second, multiple payments will be credited multiple entries into your payment history which should be reflected in the next credit report.
Most credit holders agree that it’s the interest rates that are the ones that make debt management a bit difficult to handle. After all, you are bound to pay more than what you have owed from the creditor since they also want to earn from the loan.
It’s common for first-time card holders to deal with high interest rates as creditors still have to determine whether you are creditworthy or not. Now, there are two ways that you can directly deal with interest for your debts.
Next is the fact that it removes all prior interest rates you had with your debts, allowing you to focus on the primary amount. However, 0% interest credit cards only have an introductory period of a few months, say 6 to 18 months typically where you can settle your obligation with no interest. After that, previous interest rates will apply.
In as much as a credit report is a reflection of your most recent activities, that does not mean that it is beyond disputing. After all, a credit report is prepared by a person and there’s no point repeating our tendency to screw things up.
As such, it would help a lot if you can look at your credit reports intently and look for mistakes here and there. There are certain errors that you should be on the lookout for such as:
Mistaken Identity – There are certain instances where entries for another person are included in yours because both of you have the same or similarly sounding names. This is quite troubling especially if that other person has a poorer credit performance than you and some of their missed payments are attributed to yours.
Missing/Resurfacing Entries – Supposed that you have settled one kind of debt and the same entry can still be reflected in the next few reports. Or how about a debt you had settled years ago suddenly pops up in your list of outstanding balances? Incorrect entries are actually a common error in credit reports especially for credit holders with long credit histories.
Unauthorised Entries – You take a quick look at your credit history and you notice some transactions that you never made. There are two explanations for this. One, this is somebody else’s transaction mistakenly credited to yours. Two, your card actually made this transaction. It’s just that you were not the one doing it. This can mean that somebody else is impersonating you online and spending your credits on your behalf. Unless you report these suspicious entries, they will still be credited to you and any outstanding payment that debt has will ultimately damage your credit rating.
Once you think that there were errors committed on your report, the next step is to have it amended. This will require you to dispute the errors in the proper forum like in court or a mediation environment. To make sure that an amendment will be done, there are several things you must do (or must not) when disputing the report.
It’s a mistake to contact the lender when you think that a report is erroneous. Doing so runs you the risk of not being able to fight back if that lender fails to correct their report to the agency.
Going through the proper dispute process, on the other hand, will compel either party to do what the agency requires. If they rule out a decision in favour of you, then the lender has no choice but to correct their report which leads to a more accurate score for you.
Just like your typical court case, you can only win a dispute if you have the documents to prove your claim. Every document that can prove your true transaction history will count such as receipts, bank statements, ledgers, and even images.
It would also help that you can keep multiple copies of your paper evidence. This is quite important especially if you will take the dispute to the proper courts.
Also, don’t expect to win just because the other side can’t prove theirs too. Your claim must have more weight in evidence if you really want to secure a favorable decision.
It’s not enough that you tell the issuer they sent out a wrong report. You have to tell them exactly where they got it wrong and provide evidences that can prove your claim. If, for example, they got your name wrong, provide them with your proper information and even a birth certificate which tells them that they’ve basically prepared the report for the wrong person.
Also, being specific really helps in showing that a transaction was unauthorised. You have to basically tell them that you have no recollection nor record of ever making that transaction which must be supported by evidence.
It’s a common mistake among credit holders to skip reading the terms of agreement. This might be fatal as some terms will include an arbitration clause where you are prevented from taking the dispute to court when you feel that the credit bureau mishandled your report.
Before subscribing to any of the major agencies, always look for this forced arbitration clause. More often than not, these clauses are there to protect the agency from having to deal with a lawsuit. This will make it harder for you to prove your case and remove undeserved blots from your credit history.
Credit fraud is still a persistent problem in the field of financing and is often the reason why many card holders experience drops in their credit scores. The premise to a fraud is quite simple: somebody somehow managed to get your personal information, either from weeding it out from you or gaining access to them remotely, and then using that information to impersonate you in unauthorised transactions.
Since these transactions will still be credited to you unless you dispute them, the best option is to protect your information at all costs. Here’s how:
First of all, you have to reduce your digital footprint so that potential thieves can’t track you down. If possible, log in to your social media profiles only at devices at most: your laptop and your mobile. Having fewer channels where your information is being transferred reduces your visibility to a degree.
It would also help if you don’t share too much vital information on social media. Some credit holders make the mistake of taking a picture of their credit cards to brag about how their applications were approved. If you do that, you’re basically baiting identity thieves to make an attempt on you.
Suppose that you receive an e-mail promising you a job/free money/any other reward but they would like to ask for your information just to confirm your identity. The best thing that you should do is wonder why you’re receiving that e-mail in the first place. Consider this: why are you, out of a billion people in the world, are lucky enough to be offered a reward?
Also, what kind of philanthropist are they to bother you first before sending you a part of their wealth? Wouldn’t they have sent it anyway? If you suspect the circumstances behind this offer, do yourself a favour and delete the e-mail.
Aside from being more critical of suspicious emails and minimising your visibility online, your device’s own defenses should be strong enough to thwart attacks. Regularly changing between strong passwords for all your accounts is a good place to start. Also, keeping your virus protection software up to date helps as well.
Your defenses should also extend into the real world. Keep all your credit cards stored in a well-secured bag wherever you are and always keep track of which cards you brought with you. Properly storing them when not in use in a secured container should also prevent thieves from accessing them in case your house is broken into.
The easiest analogy to keeping your credit score at a certain range is like playing a game of King of the Hill. Once you’ve reached a certain level, the most important goal for you by then would be to prevent anything (or anyone) from knocking your score several hundred points down.
Remember that your credit score will be the one that precedes you in all transactions you are going to make. Keep it within a good to exceptional status and you’ll have no trouble securing vital loans in the future, among several other things.
Have you had trouble maintaining a consistent trend in your credit scores? What methods did you use to ensure that your score is at least decent every report? Let us know in the comments section down below.