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Free Credit report, Low Credit Score: Why? |
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Low Credit score: Why?Credit rating is health monitor of your creditworthiness. Your credit rating shows the probability that you return the debt. Low credit rating represents negative factors which the creditors see in your Credit Report. If you Credit score becomes low, it is a sigh that you need to reconsider your budget, probably you are spending more than you earn. Your credit rating may be low due to many reasons. Some of the reasons are presented below: - Paying bills late. One of the biggest factors in the determination of your Credit score is your past payment history. While one or two late payments on your mortgage, credit card or other important obligations over a long period of time may not significantly damage your credit record, if at all, making a habit of this can count against you. - Not paying the minimum amount required. If you don't make at least the minimum payment on your credit card or other bills, your creditors will eventually report your account as past due, and that's a bad mark on your credit history. Not only that, but paying less than the minimum can result in late fees and additional interest charges, which can add up quickly." - Keeping debt levels too high. Potential creditors will be concerned if there are indications you already owe a lot of money on credit cards and other obligations because additional debt could stretch your ability to repay. One way creditors evaluate whether to approve a loan or charge a higher interest rate (which is done to compensate for higher risk) is to look at how much you owe compared to your income. Creditors also consider how much of your credit card limit you typically use. If you are "maxing out" your credit cards or otherwise keeping a high balance in relation to your credit limit, a lender could question your ability to make payments on additional debt. - Not alerting current or potential creditors if you've moved or changed names. Suppose you move and don't notify your existing creditors. If your monthly credit card statement and other bills don't reach you at your new address, you may miss a payment or two, and that tardiness can be reported on your Credit Report (not to mention the penalties or interest charges from your card issuer). Or, if you change names because of a Marriage or divorce, and you apply for a loan without informing the potential creditor about your previous name, the Credit bureau's report may show only your recent financial record under your current name. - Filing a bankruptcy is a serious step, which definitely damages Credit score and undermines your ability to receive good credit offers for several years. Before to file a bankruptcy, you should consider the other options to repay the debts, such as debt consolidation or payment plan. debt consolidation or payment plan will allow you to combine all debts into one large loan. The total amount of your debt will be higher, because the bank, which provides the loan, also desires to earn money. But this huge loan will help you to decrease monthly payments and make your financial life manageable for you. Filing a bankruptcy is the last resort for the debtor. File a bankruptcy only if you see that you are unable to manage the debt amount and there is no other way to get out. In order to improve your credit rating you have to avoid the bad factors above or start working on credit rating improvement. |
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