Are you going to apply for a credit card these days? Are you considering asking for a mortgage loan, or of any kind, in the coming months? At the moment, do you not have in your plans to go into debt? In any case, you need to know your credit score and how you appear to the credit institutions because you can’t tell when you should turn to them.
When we talk about credit history, we are not referring to the nightmare that many believe, and it is not a synonym of ‘request not approved.’ A good record can allow you to choose between the options, select the one that best suits you, and not have to accept only or few products that fit your profile.
Over time you accumulate different types of experiences, including credit. This ‘resume’ reflects a complete picture of your behavior as a debtor, based on your payment habits for open and closed accounts, as well as the use and management of your financial products, the number of times you have managed the opening of a new product, the level of use of its products such as credit cards and revolving loans, among other variables.
As a result of this history, you obtain a score that represents your credit risk, a good performance in the elements as mentioned earlier is reflected in a higher score or score, and that translates into greater probabilities of payment and less risk of default, that is, this number is a reference for companies, banking, and financial entities when deciding to grant you a loan or not.
How much is a good grade?
In Colombia, the leading financial information centers are TransUnion and Datacrédito, which used statistical models to create different scores that are a reference for the financial sector. In general, if your score is between 600 and 750, you are considered a medium risk, and if it is above 750 points, you can be viewed as a low-risk client. It is worth mentioning that the data collected is related exclusively to credit behavior, your personal or work information will not affect said score in any way.
However, each financial institution has its own ‘risk appetite’ standards and creates internal scores. For this reason, different measurement scales have been generated that do not allow fixing a single figure. In any case, if you have had proper management of your financial products, it is very likely that you will be able to access credits and that you will also receive better rates . of interest, the higher the score, the less risk it implies for your creditor and, therefore, you can be granted a lower interest rate.
On the other hand, if your credit history has not been the best, this will be reflected in your credit scores, which means that you will have difficulties applying for some loans.
Some recommendations to improve the score:
-Pay your loans and credit card debts on time. You can use automatic debits or reminders to timely comply with said obligation. If you are in a difficult situation, the best option is to approach and talk to the entity.
-Use your credit card responsibly, that is, without reaching the limit of the available space. The entity can offer you very high quotas, which is not why you should send them to the limit. The ideal is not to exceed 50% of your credit limit.
-Request new credits only if necessary. Opening them and not using them does not improve your rating, and it can bring you complications if you do not have good planning.
-Keep your history active. If you haven’t started building it yet, you can do so through products or small obligations.
-Authorize financial entities to consult you at credit bureaus only when you are sure of acquiring a new product. Many consultations of this type may mean that your financial situation is not good, that you have many emergencies, and therefore the risk will increase.
-Check your credit history constantly and check the record of your data.
Having a good credit score is possible if you keep track of it, you should not only consider or worry about it when you go to apply for credit, because by then it may be too late, on the contrary, if you keep a constant review and tries to comply with the recommendations to improve said score, the probability that the response to your request will be positive will be very high.
