Building a good credit history is essential to getting the best financial benefits, such as great credit cards and low-interest loans, and may also affect your chances of getting hired, renting an apartment, etc.
To improve your credit score, you can follow these basic tips, according to a report by the American network “CNBC”:
- Pay bills on time: Commitment to paying all bills, such as loans and utilities, is the factor that most impacts your credit score.
- Enable autopay or reminders: Use the autopay feature or create reminders to ensure bills are paid on time.
- Avoid opening multiple accounts at once: Too many credit applications negatively affect the score, so submit your applications carefully.
- Check for errors in your credit report.
- Keep your credit utilization ratio low: It is preferable to keep the ratio below 30 percent, and requesting a credit limit increase may help.
Basic tips
In special statements to the “Eqtisad Sky News Arabia” website, the economic expert, Dr. Mustafa Badra, addressed the main factors for improving the bank credit score for individuals and institutions, stressing that this improvement depends on a set of basic determinants that contribute to enhancing the ability of financing agencies to reduce… Financial risks.
Badra pointed out that raising the bank credit score for individuals requires the presence of several factors, the most prominent of which are:
- Financial solvency: This factor indicates the individual’s high ability to meet his financial obligations on a regular and sustainable basis.
- Ability to repay obligations: This factor represents a key indicator of the low level of risk associated with an individual, which enhances his credit rating.
- Clarity and guarantee of sources of income: Regular and stable income is a basic guarantee that enhances the evaluation of individuals when applying for loans or bank financing.
As for institutions, Badra explained that improving their credit rating depends on:
- Strong financial solvency: Banking institutions rely heavily on this criterion to evaluate corporate applicants.
- Diversification of income sources: contributes to reducing the risks associated with the decline of a specific sector of economic activities.
- Operational adequacy and positive business results: These factors confirm the organization’s ability to achieve sustainable profits.
- Distinctive credit history: An organization’s history of fulfilling its financial obligations is a decisive criterion in determining the degree of risk.
Badra explained that banking institutions set these standards to ensure the safety of lending operations, as the focus is on customers who have a high credit rating. These measures aim to enhance financial stability and reduce default rates, which will reflect positively on the bank financing portfolio.
Badra also stressed that banking institutions rely on international standards in the evaluation and selection of clients, which enhances their ability to diversify their financing portfolio and ensures the provision of financing to the most deserving institutions and individuals.
Influencing factors
According to a report on the “News Nation” website, there is a main group of factors affecting the credit score, as follows (arranged according to the degree of influence):
- Payment history (35 percent): This indicates your commitment to paying debts on time.
- Amounts owed (30 percent): Measures the ratio of debt to available credit limits.
- Length of credit history (15 percent): Reflects how long you have used credit.
- New Credit (10 percent): Measures the impact of new credit accounts.
- Diversity of credit types (10 percent): Includes the different types of loans you manage.
There are a set of tips for improving the credit score, as monitored by the site, the first of which is paying on time, as payment history is considered the most important factor in improving the credit score.
It is recommended to make the minimum payments if the full balance cannot be paid. If you are late with a payment, try to pay before 30 days have passed to avoid reporting it to credit agencies.
If repayment is difficult, contact the donor to request joining programs for temporary fee waivers or interest reductions.
Reducing the percentage of credit utilization is also one of the main factors. The ideal percentage of credit utilization is less than 30 percent of the available credit limit.
You can achieve this by making small, recurring payments throughout the month rather than all at once, increasing your available credit limit or opening additional credit cards “if managed wisely”.
According to a study conducted by the US Federal Trade Commission, one in five people has an error on their credit report, which could negatively affect their score. Common errors include (incorrect personal information, closed accounts reported as open, or fraudulent activity due to identity theft).
Improve credit
In the same context, banking expert Mohamed Abdel-Al explained, in his statements to the “Eqtisad Sky News Arabia” website, that raising the bank credit score is closely linked to credit portfolios and deposits, and diversifying those portfolios to reduce risks.
It is one of the most prominent factors in raising the credit score
- Solvency ratio: represents the ability of individuals and institutions to meet their obligations.
- Assets and supporting accounts: Used to ensure compliance with loan repayments.
- Total liabilities: The total volume of commitments from all banking entities is taken into account when assessing risks.
Abdel-Al pointed out that financial institutions operate in accordance with corporate governance controls, which ensure financial discipline and support their ability to proactively detect and manage risks. These mechanisms are considered essential in maintaining financial stability and regulating credit operations.
