According to businessdictionary.com, creditworthiness is a creditor’s judgement of an entity’s current and future ability, and inclination to honor debt obligations as agreed upon. It is usually based on the credit history, credit rating, and character of the entity. This is the primary attribute that banks are looking at when deciding whether to offer credit to businesses or individuals. It is based upon factors, such as the history of repayment and credit score. Lending institutions also consider the availability of assets and extent of liabilities to determine the probability of default. It is important that each person keeps a track of their credit score because this is the main metric used by institutions when determining a person is worthy of a favorable rate. Using credit responsibly is an integral part of personal financial health. Not only is credit a key factor in securing loans for a home, vehicle or other major purchases, landlords often look at credit before approving new renters, as well.
According to realestatebook.com, here are some great tips to boost your creditworthiness:
Limit the number of cards
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People are bombarded with dazzling credit card offers, but applying for too many can negatively impact credit while also increasing the risk of deep debt. A good advice for this is just to have at least 2 credit cards. One is for the regular or daily news, and the other one can only be used in case of emergency. Having too much credit cards might end up getting you spend much more in total than you realize.
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Exceeding limits or paying late, even a day or two, will hurt your creditworthiness, resulting to higher penalty interest rates and show up on your credit report. Be careful not to apply for cards at once since this will result to a hard inquiry from the issuer because you might get penalized when the lender checks your credit, and also too many of these will lower your credit score. Spacing out applications for a few months may help you avoid these penalties though.
Pay off balances every month
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Paying off the minimum due amount is never an option. Not only will you never pay off your bill, but the interest rates that companies charge will actually keep your bill growing. Try to pay as much as you can afford and cut off other spending areas to help you focus on paying off your credit card debt.
Never get a cash advance
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According to Investopedia.com, the main reason why taking a cash advance is such a bad idea is that you start accruing interest the minute you take the advance – unlike with regular credit card purchases, there is often no grace period. The credit card company also charge us with an automatic fee for using such feature and they won’t consider a cash advance to be paid off until you’ve finished your balance with your other purchases.
Don’t close old accounts
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According to Carson Rolleri’s blog “Don’t close that account!,” the best way to go is managing some credit activity on all of your cards, whether it’s making some small purchases or putting regular subscriptions on your older cards. Showing some credit activity every month is the best way to get the best credit score possible, along with paying the entire statement amount on time for all of your cards. Closing a card may negatively impact your credit because it reduces credit-to-debt ratio and credit history, both major factors credit bureaus use to calculate scores.
…Unless there is a steep annual fee
In this case, the benefits of closing the account may outweigh the potential effect on credit. Fortunately, there are no-fee credit cards that offer impressive interest rates, promotional financing and even reward travel opportunities, but you should know where to look. For a list of top credit cards with no annual fee, click this link http://bit.ly/1HEVsbg from credit.com.
Review Statements Each Month
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This is to ensure that the details are accurate and that you understand its terms. As per Bank of America’s advice to their cardholders, “Review your bank and credit card statements regularly and check for any suspicious activity such as withdrawals or purchases you didn’t make. If you don’t receive paper statements, make sure you check your statements online at least once per month. The more frequently you are checking your accounts, the quicker you would identify any theft and minimize the possible damage.”
Opt-Out of Prescreening
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Avoid the temptation of opening a new account by opting out calls or emails about prescreening. You can actually sign-in to www.optoutprescreen.com to help you out.
Use the perks
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Credit card companies offer different perks other than travel points or cashback that many consumers don’t know about. From buyer protection and car rental discounts to extended warranties and free airport lounges. Better check the fine print about their offers so that you can take advantage of it.
Use cards online
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If you use debit cards to pay online, if your number gets stolen because of a simple identity theft, you might get your money back as soon as possible because the bank company is still resolving what happened. While in using credit cards when making purchases online, in case this happens, you will not be out of any money while the card company investigates the situation.
Sources: realestatebook.com, businessdictionary.com, Investopedia.com, bbb.org, bankofamerica.com
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