How can I improve my score?
Every financial transaction we make, from paying our cell phone bill to taking out a loan from a bank, is recorded on our credit score. This history, which encompasses our credit behavior, generates a score that rates us. And based on the good or bad ratings we accumulate, we will have better or worse credit conditions in the future.
All banks, credit unions, insurance companies, and other companies have access to our credit history, which will be consulted every time we apply for a loan, a credit card, or any other type of financing.
What are the advantages of good scoring?
If our credit score is good, when we apply for a loan or credit card, we’ll be offered a lower interest rate, a higher amount, or a longer term, because it’s considered less likely that we’ll default. On the other hand, if our credit score is poor, we’ll be offered more demanding terms or even denied credit.
What worsens our scoring?
– Have outstanding debts with financial institutions or have had them in the past without regularizing them according to the term agreed upon at the time of taking out the loan.
– Having had debt collection efforts in judicial and extrajudicial instances for these debts.
In addition to verifying our income, financial institutions use information from our credit history to evaluate how much money they can lend us. They generally use a rule: no one can pay more than 30% or 35% of their estimated monthly income in loan installments.
How do we improve our track record?
It’s simple:
Every time we pay on time and keep our debts in good standing, our credit score improves. For example, if you pay your credit card statement on time, even if you sometimes make the minimum payment.
Every time we spend, it’s recorded. If we pay for something with a card or bank transfer, that information will become part of our credit history and improve it. This way, a bank or credit card company will estimate how much income we have, and that will help them offer us better loans. This is especially important if you work informally. If you spend all your money in cash, your spending level won’t be recorded anywhere. Every time you pay with a transfer (for utilities, rent, school fees), it’s recorded in the system. And it helps you improve your credit history.
Of course, institutions evaluate our estimated income to decide whether or not to lend to us. But never forget that they also look at our background.
A recommendation: check your credit history from time to time. Sometimes we have old debts we can’t remember. A classic example: a credit card we stopped using a long time ago and has an unpaid balance. That history, that poor credit rating, prevents us from accessing a new loan.
