It has almost become a legend but with the soaring house prices and the need for
everyone to carry a mortgage, credit ratings are of great importance. Credit cards are
the most convenient financial tools that can help a person purchase things without cash
but when they’re misused, they can soon become nasty little debt generators that will
straightaway affect your credit score.
According to recent reports, it has been found out
that there is a sizable amount of the entire population that don’t carry credit cards and
about 10% of the American households don’t have even one credit card. As credit cards
have become a part of our everyday life, there are some who feel left behind as they don’t
carry credit cards. But this is not the fact.
Deciphering the credit rating model
The credit rating model is the most important model that you have to take into account,
especially when you are in the market to take out a new line of credit. Credit cards and
credit score can be a potential indicator about whether or not the lender can be lent
money with an affordable interest rate. Credit cards play an important role in framing
your credit score but your credit score is just a part of your entire report. If your credit
cards are a significant part of your credit history, you have to make sure that you improve
your score in order to help yourself grab a loan within your means.
You need to keep your credit-debt ratio as low as possible on all your cards.
The ideal ratio would be about 30%. The cards that show the longest history of regular
payments will help in boosting your credit score. Pay off the amounts that you owe
and then cancel your credit cards that have been giving you trouble. In case you carry
a balance of more than 50% on one card, it might be a better option to split the balance
among two different cards. By putting the debt in a bigger box, you can make the
debt look smaller.
Your credit rating is something that is checked by your mortgage lender, your auto
lender and your credit card companies. Therefore, unless you maintain a
pristine credit rating, you won’t be able to help yourself with a better line of credit at an
affordable rate. When you take out a credit consolidation loan and your lender asks for
your credit report, the inquiries hurt your credit score. Therefore, you should try to avoid
too many hard inquiries while taking out new lines of credit so that they don’t hurt your
Summing it all up, you need to make sure that you’re using your cards in the best way possible. Well-ordered finances will always
help you get back on track and also build your trust among lenders.