A credit bureau is a private company that receives information from banks and financial entities that grant loans to a natural or legal person. This information is filed in a credit history under the name of the person who requested it, for which the information on each credit that is acquired is collected, as well as payments and debts.
From the time you apply for a loan, you are already in the credit bureau. Financial institutions use data from credit reporting bureaus to determine which loan or financial product is adapted to your capability to pay without defaulting.
In the case of defaulting on the payment of your debts, the credit bureau will mark you until you settle the debt, and in order to erase that “blemish” from your history, between one and six years should pass depending on the amount of the debt. VantageScore is a perfect example of a credit score formed after the merger of three major credit bureaus: TransUnion, Equifax, and Experian.
FICO (Fair Isaac Corporation) is another type of credit score used by most bureaus to determine the creditworthiness of potential borrowers. So it is important to have a good credit history and maintain a good score in the bureau since this information will depend on the authorization of new credit.
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How to Maintain a Good Credit Score
We share five tips for you to maintain a good record in the credit bureau.
- Avoid unnecessary purchases: Buying items anyhow will only increase your expenditure, making you borrow some extra cash to service other needs. You may experience challenges paying back the borrowed amount, which may affect your credit score. Identify your monthly income and prepare a budget to cover monthly expenses and extras, sticking to not making unplanned purchases.
- Review the account statement in detail: Keeping a close eye on your financial statements is essential if you want to maintain a good credit score. You will have an idea of your financial state and take necessary measures to avoid overspending. Carefully examine each of the movements shown in your account statement. With this, you will have the assurance that the transactions are correct.
- Purchases for months without interest: It is another thing you should do to boost your credit score. You will save a lot and avoid incurring a lot of expenses on interest. These types of purchases are tempting, but the excess of these “promotions” can lead you to lose total control of the monthly payments and the revolving balance. Therefore, you will have credit delays.
- Know your score: Keeping track of your credit score is vital in helping you understand your current situation. The score tells you the credit situation you currently have. Scores determine your rating. For example, close to or equal to 850 points reflects a healthy credit performance, and close to 400 points shows an unsatisfactory situation. You should know your score to make sure you are on the right track.
- Correctly cancel financial products: Verify and confirm the debit balance at the settlement time, as this balance should be zeroed. Remember that interest will be generated on the total balance in the event of an unpaid balance, and you could fall into default.
Follow these tips carefully to maintain a good record with the credit bureau to remain eligible for borrowing.