For a Financially Stable Future: How a Good Credit Score Helps

Have you had a good look at your credit score lately?

Unknown to many, one’s credit score or rating is an essential marker of someone’s financial capacity. Because it’s a complicated calculation, many disregard the figure.

They think it doesn’t concern them. That is far from the case. Whether or not you have a bank account, are planning to get a loan for a car, or simply borrowing money, your credit score decides how far you can take a step forward, financially.

On the other end, banks, insurance companies, and lending groups should pay close attention to their clients’ ratings. Since there is no standard credit reporting, credit scores in the Philippines are aggregated from reliable sources. Through telco-based and alternative data, they provide an accurate picture of their customer’s credit so that they can give better services.

Thus, your credit score is essential across the board. So how can credit score be improved?

From the borrower’s end, how can they get a higher credit rating to get a more significant amount or better benefits? And from the lender’s end, how can they ensure good credit rating to secure their business?

Better spending habits for borrowers

If you’re always knee-deep in debt or spend money frivolously, then you already have a bad credit rating.

Wise money management is vital in boosting your credit score. Banks and lending companies usually look into how good your financial standing is. That is, how prompt you pay your bills – utilities, phone bills, credit card debts – and how long you’ve been paying for them. They might also take the variety of your credit into account.

If you have a mortgage, car loan, and credit card and are still able to manage your payment efficiently, then your credit score is in good standing.

Contrary to popular belief, your income does not affect your credit score. Whether you earn a minimum wage or a C-suite salary, you’re in line for a good credit deal as long as you pay on time.

If you aren’t, then you should improve your payment habits. If you have a credit card, try to spend only half, or even less, of your credit limit. Not only do you avoid paying over-limit fees; you also achieve an excellent debt-to-credit ratio.

Be a more lenient and honest lender

For lenders, it doesn’t mean letting your customers borrow more money than they can pay off or offering amounts with very low interests to accommodate their credit score. In this context, it means being more compassionate.

Despite being a significant marker, how credit scoring works escapes most people. As a lender, you can attract more customers by being a learning resource for them. Be a financial coach or consultant for them. Not only can you monitor them closely this way; you will also be a more credible lender to them.

Another way to build credibility is to be transparent with all your transactions. Explain the borrowing process to them. Make sure that your loan terms fit their credit score, financial goals, and timeline. Be honest with your funding capacity. Unless you’re a national or international bank, you want to localize your lending circles. This ensures payment security and a better understanding of the market.