QUESTION: I read your column in The Gleaner about credit scores and I am interested in advice pertaining to building a better credit score for 2019, but I lack guidance.
Personal Adviser:
Your correspondence suggests that you do have a credit score, which means that you have already assumed a debt – a mortgage, a loan from the Students’ Loan Bureau, a loan from a financial institution, credit card debt or an overdraft at the bank, for example.
In such a situation, you should ensure that you pay the principal and interest due in full at the contracted times.
If you have not been servicing your debts at an acceptable level, I suggest you correct that situation now. Pay all arrears and any charges springing from the delinquency.
Beyond that, if you have a credit card, maintain a reasonable balance. Do not use your card to its upper limit. Avoid having too many cards, make note of the date payment is due and make every effort to pay off all balances when due.
Avoid a situation in which you pay just the minimum sum required. Before long, such a situation can get out of hand as interest balloons and causes the balance to increase. If you are only able to pay the minimum payment, it is not rocket science to conclude that you are in serious trouble. This is a clear sign that you have overextended yourself.
Stay clear of guaranteeing other people’s loans because you risk hurting your own credit rating if the borrower does not service the debt satisfactorily. Keep in mind that the loans you guarantee are included in your credit history.
Manage your own indebtedness. Limit the amount of loans that you assume. Keep a close eye on your capacity to service your debt by monitoring your debt to income ratio. Go beyond that. Take note of all of your obligations and, after analysing them in relation to your net income, determine what portion of your income you can reasonably apply to service debt before taking on more debt.
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