Responsible Borrowing and Credit Score

Credit score and responsible borrowing behavior are both related to each other. This is because with a responsible borrowing you will be able to make repayment of the loans you have taken effectively and successfully, and this will raise your credit score. Here are certain responsible borrowing tips for raising your credit score.

Things to do

Your credit score depends on five factors like the debt amount, credit types, repayment history, credit account’s age and inquiries. Among these five, payment history is the most valid one for it forms more than 35% of total score. Debt amount will be calculated on the basis of ratio of debit to credit and ratio of debt to income. The debt amount will be calculated after considering the credit that is available and how much you are using as well as the difference between your income and debt. All other three factors are depending on the time period during which you have opened the account, how long it is active and on the basis of number of new accounts you are opening. You must have a clear understanding as to how much these factors are related to your overall score and a clear understanding of all these five factors. Following are tips that can help you to improve credit score through responsible borrowing

 Debt Pay Down

First thing to do is to pay down the debt. If you have large credit score it is clear that the lenders think of you as responsible. But the credit score depends on the way you are using the debt. You are having a large credit and whole of it is used by you is a bad thing. You have to use only 30% or less of the credit available to you for maintaining a healthy debit credit ratio.

Credit Limit raising

If you can’t pay off the debt easily you can also increase credit limit. This will also help you to maintain the correct ratio of credit and debit. Your ratio will be thus balanced even without paying out a single debt.

Have a talk with Creditors

Even if you have made only single late payment it will be marked for seven years on your credit report and thus cause your credit score to reduce. You can call the creditors and ask them to make late payment off the record if you have made default only once or twice. This is done by most creditors on good faith.

 Keep Accounts Open

Keep your accounts open even on cleaning up of credit. This will increase average credit history age. This has got only 10% to do with your credit score.