A. Definition of Credit Scores
Credit value is the comparison value between income (salary) and the total amount of installments and credit / debt that the person has. Through credit scores, banks can see someone’s financial ability. Financial experts suggest that credit scores are better than 40% of total income. This amount is the maximum limit of someone in debt.
While the bank’s maximum safe limit in assessing whether or not a person’s credit worth is less than 30%, depends on the bank’s policy. The greater a person’s credit score, the less likely the loan is approved by the bank. Conversely, the smaller the credit scores, the greater the chance that someone will get credit.
B. How Banks Determine Credit Score Limits
Regarding the credit scores owned by a person, there are a number of categories determined by the bank. The category itself determines whether someone is eligible or not in receiving credit. Below is the distribution of credit scores ??into several categories used by banks in making decisions.
- Credit Scores Below 20%
This is the most ideal and preferred credit scores of the bank. Because the amount of the debt is considered still feasible and healthy. With this credit score, your chances of getting new credit from the bank are quite large.
- Credit Scores between 20-36%
This amount is still considered healthy and feasible by banks to receive new credit. However, in these conditions, you should immediately make savings to improve the credit scores.
- Credit Scores between 37-42%
In this condition, finance began to experience a crisis in the mild phase. It is probable that the submission of a new credit will not be approved by the bank.
- Credit Scores between 43-49%
In a position like this, you will enter financial difficulties in the near future.
- Scores of Credit Above 50%
Financial conditions are fairly serious and you should immediately seek the help of a professional consultant to overcome this.
C. How to Correctly Improve Credit Score
If the credit score is so bad, this will certainly greatly affect the overall finances. In fact, this is related to the successful submission of your credit loan to the bank. In order to improve credit scores, some people will make various efforts. Remember, this will affect your credit history as a whole. To work on improving credit scores, do the following steps:
- Increase and allocate the funds you have to pay the existing debts and installments so that the amount of the debt becomes smaller and lighter.
- Avoid spending your money without good plans and calculations. This is very likely to cause waste in finance and make you not have the financial ability to reduce debt.
- Don’t make a new debt in any form, including a number of credit card debts that you have. This will make credit scores worse.
- Always try to monitor credit scores and make sure this number gets smaller every day. This will help to be able to improve credit scores so that you are eligible to get new credit from the bank if at any time it is needed.
That’s an explanation of a credit score that you need to know. Hopefully, you can increase your knowledge. Thank you for the visit see you in the next post.