Your financial credit score is an important score which shows the percentage of risk involved if you are offered a loan. It dictates how likely you are to repay your loan on time which affects whether you will get loans, mortgages, or credit cards. It is very important to have a healthy credit score
During these challenging times it is important to get your finances in order. There are different ways to protect your financial credit scores through your credit cards, mortgage loans, home equity lines of credit and debt management.
- Credit Card: Banks are also becoming cautious and have slashed the credit card limits to reduce their lending risks. There are many individual limits that are slashed to almost a thousand dollar that is coinciding with the existing outstanding balances. There are some individuals whose limits are slashed even below existing balances. These actions not only reduce the available credit but also have a negative impact on the credit score. Read more on Credit Card.
You can protect your credit score by
- Knowing your credit card limits and not crossing these limits.
- Charge your card only to the amount that you can pay off full in one month and never resort to paying only the minimum balance.
- Check your credit card charges and balances regularly online or by phone to avoid going over the limits and possibly going into default.
- Do not close the account
- Mortgage Loans: A person’s home is his biggest asset and often his biggest liability, if he has taken loan for its payments. Furthermore the payment history on a mortgage has a major impact on the credit score of the person. You can protect the mortgage loan credit score by staying on top of payments. You should be able to make timely payments and never default in any payment. If you are unable to pay regularly, it is advised that you contact the lender immediately. If you feel that you are in very tight situation and would be no more able to pay off the mortgage loans on time it is suggested that you sell of the property. Selling of the property is also a time consuming process as there are not many people who can afford to buy homes during such challenging times. It is suggested that you should not wait till the foreclosure as it will have a negative impact on your credit score. Read more on Mortgage Loans
- Home equity lines of credit.( HELOC): These days when banks are short on credit reserves, they do not influence people to draw thousands of dollars especially if they are being drawn from emergency funds that might not be repaid. Mortgage lenders are reducing HELOC and even sending notices to many individuals that they are closing their HELOCs to keep themselves protected.
In the earlier days there were many people who counted on HELOCs for their house renovation or maintenance but the same is no more possible as the HELOCs have come with stringent policies.
To compensate for the lack of HELOC as an emergency resource you should start building your own emergency fund by saving at least a dollar a day. However HELOCs unavailability should not have a significant effect on a credit score.
When you are in debt and do not know where to move you can take help from experts who would offer credit counseling, debt management and even how to handle bankruptcy.
If you are in debts and need to protect your credit scores you can try calling lenders to explain the situation, they might consider renegotiating terms and interest rates depending upon one situation to another.
If you feel that you are in grave debts and can no longer afford to pay off the debts and bankruptcy is the only option that lies ahead. You can consider debt settlements. They help to resolve large balances at reduced payoffs amounts while avoiding bankruptcy. However this would have a negative effect on your credit scores.
Bankruptcy is the last resort for people who are in serious difficulty. This offers a severe impact on the credit score. Before considering bankruptcy it is advised that you discuss with an attorney to determine suitability and qualification.
It is suggested that you should carefully check your credit statements and analyze your financial score. You can educate yourself on various options that are available and make smart decision to reduce your debts and protect your credit at the same time.