Credit scores are made up of credit information of individuals. If you want to improve your credit score, attention should be paid to the related credit behaviors.
Support from the bank is indispensable if you want to invest or do business. However, how to get a loan from the bank easily is not known by many people. Among the factors that banks consider before approving to issue loans to their customers, credit score is one of the most important. So, what is credit score? How to improve your credit score? VietnamCredit will help you answer these questions.
Credit scores are the figures that reflect credit history, which records people’s borrowing and repayment of bank loans.
What does a high credit score mean?
A high credit score is extremely important when a person wants to get a bank loan, which means that he/she will have high chances to be accepted by the bank for a loan. Along with that, a higher credit score will help them get high loan limit from the bank and also enjoy low interest rate.
2. Credit scoring and ratings
Currently, people’s credit scores will be given based on factors including: Payment history, current debts, duration of credit relationships, new credit loans, and credit loans coordinate as follows:
>> What is Credit Rating and its role in doing business?
- Payment history: This indicator reflects whether or not customers have paid off their debts on time. Most credit scores will be calculated based on the debt payment history. Therefore, when customers pay the debt on time and seriously, the credit score will be high.
- Credit loan: This indicates all credit liabilities made up of the total unsecured and mortgage loans issued by the bank.
- Duration of credit relationships: This is an indicator reflecting the time the credit account is opened. The longer this time is, the more appreciative it is as banks or similar organizations assess the overall and more comprehensive financial behavior of their customers. For example, a card opening time greater than 6 months may boost credit score and help build a long history.
3. Ways to improve your credit score
Credit scores are made up of credit information of customers, so if customers want to keep credit scores high, attention should be paid to improving related credit behaviors.
Firstly, the debt payment situation has to be improved
- Pay your debts on time: When you have a loan at the bank, you need to monitor the repayment on a regular basis. Late payments or forgotten payments will reduce your credit scores.
- Check your credit report regularly: Credit reports are detailed information about your credit history, including credits and loans, late payments, etc., for credit scoring. Therefore, you need to check to find out false information (if any) about the situation of your debts and payments. Controlling your credit records also helps you prevent fraud using your personal information to apply for illegal credit.
- Consider credit counseling with the lender: When you are overloaded with high-interest loans from the bank or almost on the edge of having difficulties in paying your debts, you should negotiate with the lender immediately and ask for their advice. Lending banks can help you reschedule your payment with lower interest rates to make the repayment plan more feasible at your ability.
Secondly, always be aware of reducing the lowest total debt
You need to have a reasonable repayment plan from the beginning to be able to pay down your debt. In fact, the broader the ratio between total debt and total credit limit is, the higher your credit score is. You need to consider paying high-interest debt first, and at the same time try to manage your credit card spending effectively.
Thirdly, consider getting additional loans carefully
- Borrowing loans within your affordability: Once you have assessed your needs as well as your current income, you should borrow loans where the monthly repayment expense does not exceed 50% of your income to ensure that you are not insolvent.
- Avoid constantly registering multiple loans and opening new credit cards: If the opposite happens, your credit profile will be rated as at high risk, and your credit score may also be underrated. VietnamCredit hopes the information above will help you better understand credit score, and at the same time know the most useful ways to raise your credit score with banks and credit institutions.
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Henry Tran - VietnamCredit