How to keep out of financial distress? Due to financial complexity, you might have done your personal credit score wrongly – intentionally or unintentionally. It’s not exactly your fault but financial institutions like banks often faulted you as the ultimate responsibility falls into your hands. Before wreaking havoc to your creditors, observe the following five do’s and don’ts of a credit score.
How to keep out of financial distress? Due to financial complexity, you might have done your personal credit score wrongly – intentionally or unintentionally. It’s not exactly your fault but financial institutions like banks often faulted you as the ultimate responsibility falls into your hands. Before wreaking havoc to your creditors, observe the following five do’s and don’ts of a credit score.


Do’s of a credit score

Here are five dos of your credit score:

1. Keep track of payment history: As a human, you tend to err on a missed payment, over-the-limit borrowed money, bounced check payment, credit card late charge, unpaid debt, or received late notice from creditor (generally late in transition process). The mistakes made may cause a drop on your credit score from 700 to 609, 650 to 600 or under 450. Such a significant impact led to higher interest rate payable and bank’s approval rating.


Management of tracking payment history is honorable. For every missed or late payment, the bank shall include into a spreadsheet and send over to a credit reporting agency. A centralized platform keeps banks and credit bureaus aware of your financial health. Therefore, bear in mind the repayment deadlines as well as any other credit card installment plans. It’s imperative to manage financial control in recording down every single transaction – using an online application on mobile for ease of usage.
Tracker: One good way of tracking existing payment history is to induce balance-transfer scheme. A balance transfer program helps you in linking all outstanding loans, credit cards, cash advances, monthly installment plans, autos and insurance premiums altogether. It aids in tracking every single transaction in a mere 1 balance-transfer. You may apply for ongoing 0% balance-transfer or 0% APR program – just clarify on the promotional clauses.


2. Tag a friend along: Tracking for an extended period might get boring, it’s advisable to tag a friend who is doing credit score reporting as well. A friend, generally someone close to you, may offer immediate financial assistance or share tips and tricks in cleaning up bad credit – both of you must share critical information on credit fixes. Evidently, the person who is helping you in credit score calculation has to be experienced, knowledgeable, and resourceful.


Management of friendship in repairing credit history is obligatory. He/She has to be constantly updating you on personal transaction, individual spending, weekly budgeting, or additional installment plan. You’ll guide your friend in adequate financial control as well as learning the do’s and don’ts of credit score. Since there isn’t a standardized guideline in fixing your credit score, both your friend and you has to observe the financial spending budgeting in which both agreed upon.
Motivation: While it’s possible to check your credit score, having a friend or relative to tag along yields great motivation primarily because you’re not alone in searching for ideas (even if both of you are lost) and having someone to remind you on the go. The need for a friend is proven by social media experts, gaining approval from a friend on your payment history – letting others know you are reliable when “bad” things happened.



3. Pay up & show up: Instead of avoiding the payment date, outstanding bill, or bank’s lawyer letter, show up in front of creditor(s) and seek redress. It’s highly unlikely that the problem will go away on its own. Facing the reality, you’ll need to undergo a drop in credit score but the bank shall take professional credit control and assign the right mandate in resolving the dispute. Since banks needed to retrieve the “lost” debt, they’ll accommodate your personal request in loan repayment and negotiate on repairing negative credit.


Management of paying up & showing up in fixing bad debts is a skill. You’ve guts to face the truth of credit repair instead of missing the unpaid amount, getting the first step done. Next, you needed to exercise financial prudence in making the right choice of purchase (going forward). Do not engage in perilous activities like securing a housing mortgage, a new auto, a cash advance, or some unwanted criminal offense – identity theft. Fraudulent activities shall land you in jail while lawyer letter from banks attract heavy penalties and fines. Never engage in dangerous offenses at all!
Payment: As a payee, naturally due to paying existing bills and loans, you’ve to improve on spending habits as well as forming new consumption pattern. The need for personal finance gets in the way, try to feel uncomfortable at the initial phase of credit score fix. After some time, those awkward loss of credit or financial planning ideas will tend to be familiar and you might be generating passive income from certain retail investment like dividends from equities, coupons from bonds, or interests financing from fixed deposits – returns on investments.


4. Invest in a credit repair consultancy: Spending money on personal consumption does not generate a return. Instead, investing cash in a credit repair firm can do wonders, getting consultation from experts in this niche that helps to bolster financial productivity, financial planning, credit card debt consolidation, mortgage re-financing package, and other types of economical setting. These “stuff” can truly fetch higher valuations and reputation to you, in exchange for some time and money. It’s imperative to closely observe the guidelines set by the credit repair agency as the experience in fixing bad credit cannot be bought by money.


Management of credit repair investment is not simply tossing cash into the firm. An agency being employed have to possess key attributes such as prestige, debt repair portfolio, certificate of establishment, standard operating procedure, proven solution to your credit problem, and financial background in managing bad debts. These core attributes may assist in financial mobility by preparing you for potential calamity or advancing your aggressive credit repair progress swiftly – sometimes getting the “job” done within a few months or slowly rebuilding credit histories.
Invest: Since no two credit cleanup is the same, to cater to each individual’s needs, you’ve to make sure the appointed credit repair company has the ability and competency to handle your current financial affairs. When in doubt, never select an affordable credit repair agency even if the terms are fair. It’s imperative to invest in the right company and expect a return on investment, at least a temporary freeze in rate of interest being generated in your current account. Failure to negotiate a deal between a creditor and debtor revealed uselessness of an appointed firm – not being able to yield a positive return on credit score.


5. Design creative debt repayment method: One good way of fixing bad credit is to be innovative. You may find existing ideas in the market such as the debt snowball strategy – paying off small debts at the beginning phase while monitoring credit score for bigger debt repayments – useful. It’s a free method widely known to many ex-bankrupts and you too can focused on paying of smaller loans before shifting to higher installment plans. The good thing is that interest payable is being lowered, thereby gearing your salary to servicing off mortgage repayments comfortably (if smaller bills had been completed).


Management of creative debt repayments can be tough. Since the internet has been broadly available, many bankrupts started looking for riskier investments like identity theft, credit card fraud, or stealing of personal data. Do not attempt to furnish your personal credit data, individual information, credit card details, credit score, credit report, or any info. Just perform research in educating on personal financial planning while keeping an eye on your wallet – never give away personal information or divulge card details.
Emphasis: Strategies cannot be applied to everyone. You’ve to identity a comfortable way of repaying unpaid debts. At the beginning, improving credit score using a fixated financial plan is going to be tough. Gradually, learning on asset-liability management does help in repairing negative claims from creditors. Bankers do appreciate your attention toward cleaning up credit score while remaining contactable when there is any balance transfer promotion going on – bolstering debt-financing repairs in the long run.


Don’ts of a credit score

Are you struggling to get approval for a mortgage, personal loan, college debt, payday, an auto installment, or other debt-financing tool? You might have made a wrong decision in doing up your credit score! In order to identify the error made in your financial progression, it’s wise to check out the five dons of a credit score below:


1. Don’t increase spending (debt utility ratio): For those who are unaware of the credit utility ratio, or gearing ratio mentioned by financial institution such as a bank, a credit bureau, or a lender, chances of performing credit repair wrongly is higher. If you’re loading up new credit lines and spending on low-quality purchases, your personal credit score would get affected badly. Banks and credit card companies often monitored their customer’s purchases before determining the appropriate credit review to be approved.


Management of credit utility ratio is important. As mentioned in this topic, what’s a personal finance, you’ll be exposed to the proper debt utility percentage points as well as the needful financial calculations for a credit score. It’s imperative to steer out of score implosion while maintaining a healthy asset-liability ratio for a strategic portfolio mix. Yes, a certain percentage of paid debts (or credit payment history) is necessary for your creditor to judge on past borrowed money transactions.
Utilization: Nothing is more important than observing the creditor’s guidelines. Be it from the credit union, a local bank, a micro finance firm, a credit card agency, or any business offering credit service, you’ve to keep in-line with bank’s policies else risk getting a credit card rejection or disapproved bank loan – either way facing difficulty for you to re-apply for a loan application.


2. Don’t circumvent borrowing guidelines: Why does a bank blacklist a certain category of customer? If you’re a vivid borrower, long tenure in receiving borrowed cash, there is an opportunity for you to circumvent banking guidelines. It’s due to the nature of getting comfortable with the bank’s relationship manager as well as familiarizing with local lending policies – gaining favorable responses in bypassing certain legal frameworks adopted by in-house bank’s compliance team. In doing so, there is a risk of being implicated into financial & legal repercussion.


Management of trust factor in the bank is fragile. Even if you are a long-time borrower, a cash advance, a personal loan, or a new debt, do not circumvent loaning policy in any financial institution. Most banks have a centralized lending platform to track their customer’s borrowing limits and monitoring bank-to-bank (LIBOR or Fed rate) system for overnight prime rate lending adjustment – cross-integrated into consumer banking platforms. You’ll have no chance of “gaming the system” when it comes to lending money from investors.
Intermediary: As a financial intermediary, banks pooled funds across a broad spectrum of fund houses; individuals, corporate lenders, fund managers, and other asset-related loans. The bank has to observe strict financial regulations, hence requiring to closely observe your personal application for a credit score approval or increase in a scoring model.


3. Never sell your credit score info: What happens if you leave your gate unattended? It is the same analogy behind revealing your credit score, divulging personal information, selling your credit report to others, involving third-party merchant to analyze your fico card, or even asking generic questions online. These financial problems do lead to one of the biggest fraud in the United States and United Kingdom – identity theft. No amount of credit guard protection or credit scoring platform can ensure your personal and financial safety.


Management of sale of credit score is strictly prohibited. Assuming your individual identity has been leaked out to the worldwide web, intentionally or unintentionally, you’ll faced legal implications, subjected to heavy fines or serving a jail term of not more than ‘X’ years (leniency depending on the local jurisdiction). Never attempt to sell your personal identities out to the public. Sale of credit report is against reporting agencies’ policies and it will do you no good benefit in the first place!
Fraud: One good practice to adopt is to purchase a credit report using your name. You are entitled up to 3 credit reports, separately from three credit bureaus – each providing you an annual credit report for you to check credit score. Therefore, you’ve to be confident in reading the report card while learning the tips & tricks of fixing your credit score the right way and not involving illegal score boosts.


4. Never assume calculating your credit scores: There are many different ways in calculating especially using an online credit score calculator. Many consumers fell into this pitfall of using online scoring models, developed by corporate-hungry developers who wanted a slice of profit, and got into financial distress after learning that they’ve overleveraged on the necessary credit utility ratio – rationing of borrowed cash has to be involved & trimming down on unpaid debts became a chore.


Management of credit score calculation is a mystery. Since there’s no actual formula that has been approved by credit bureau, calculating your credit score card becomes a wonder. If you’re ensnared into using an online credit score calculator, been over-utilizing your personal credit ratio, do implement proper financial control to mitigate potential cashflow damages, thereby lowering your report card once there is a credit score review going on.
Operation: You’ll observe a strict debt repayment procedure, increasing monthly repayment in servicing mortgage debt, reducing credit card consumption, planning for personal budgeting, fixing your credit management tightly, and paying off the difference between current used credit ratio and Experian’s scoring model.


5. Never hire a lawyer to combat claims: Why are your creditors claiming rightful ownership to your personal assets? There is a valid reason for a claimant to submit lawful claims in seizure of individual properties. Instead of combating credit disputes, sending lawyer letters to one another, why not figure out the right way to manage dispute resolution? Seat down with your creditor(s). Question on the lending policy and initiate a response toward positive (verified) claims.

Management of law firm involvement is not advisable. While you can dish out legal suits to your creditors, your banks, your relationship managers, your credit unions, your savings & loans associations, or your financial lenders, do have a sophisticated legal debt framework done by external auditors and lawyers – going head-on with them is merely testing of patience and luck. You’ve to be assertive in disputing expired claims on assets as well as serving a proactive attitude in repaying the loans on time.
Lawyer: No one wants to involve an ombudsman or legal agency. Both the creditor and debtor knew the incurred costs, at times not worth the penny. Although you’re aware of some ex bankrupts not paying small sums of money, they had been blacklisted by many credit scoring agencies and lending corporations. Do not be like them! You do require a certain amount of borrowed money (for leverage) in order to rebuild your credit history or even to grow a portfolio of asset classes (spring-boarding your retirement planning process).


Good to know about credit score

Unless you’ve been leaving under the rock, you surely notice that credit reporting agencies do observe a scoring model or outsourced to external vendors in managing their score calculations. To err on the safe side, do continue your venture in learning the best practices of credit score concepts.


Here are some of the industry good practices for your credit score:
• Learn more about scoring models such as FICO Score & VantageScore 3.0
• Communicate with 3 credit bureaus: Experian, Equifax & TransUnion
• Guard against identity theft frauds
• Invest in a credit insurance protection scheme
• Seek redress from local credit union if need be
• Don’t help a friend to apply for personal loans
• Try to manage individual consumption
• Invest in a diversified portfolio: Mutual funds, equities & bonds
• Never attempt to cheat on your credit score
Knowing the do’s & don’ts of your credit score does help in improving the chances of your credibility. It’s wise to engage a credit repair company if you’re unsure of any negative object listing or trying to uproot a failed cleanup credit service. A single attempt of criminal breach of trust, like that of an identity theft or a fraud in credit card, will permanently detriment your credit score (for life). Proceed to fix your individual credit score today!


Quote of the Day: “Get uncomfortable with spending habits – KIG Hall [2013-2018]”

Relevant Topics

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This article was originally published on February 09, 2014. It has since been updated.