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What is credit scoring and why do we have to have credit cards to make a credit for ourselves? Many people may wonder about the importance of credit cards because they usually only be used for installment payments. Actually, they are a measure of the cardholder’s ability to repay debts which will be very useful for credit cardholders in borrowing.
Credit Scoring is the credit history score used by financial institutions to assess their creditworthiness from credit cardholders based on their statistics and repayment history which will be used only if the credit cardholder wants to apply for various loans. Credit scoring is used to determine whether the credit limit is approved or how much the cardholder will receive, depending on the credit score considered by financial institutions.
Having a reliable credit score will make it easier for financial institutions to lend us a loan. For example, Mr. A would like to get a loan for a house. Mr. A’s history is that he has never had a credit card and never had debt before. He pays in cash when purchasing goods. Many people would think that Mr. A must have a good credit score, but in fact, it might be even harder for Mr.A to get a loan because financial institutions can’t know the details of his monthly spending. However, if Mr.A has a credit card and a monthly installment history, financial institutions will consider lending more easily.
In fact, the National Credit Bureau (NCB) holds all of its customer credit information. NCB will do some credit scoring. However, banks and financial institutions will not directly use NCB’s credit scores but will mix the data to meet each bank’s criteria before grading them. There are eight factors in consideration which are:
Credit score checking is no longer difficult. Apart from checking at the Buro Credit Center, ATM, or bank counter, you can simply check it via mobile banking through each bank application. The result will be out within 3-7 days with the cost of 150 baht
If you find yourself currently with a low credit score and are at risk of failing to approve, you should start adding your own credit score in the following ways:
1.Pay debt on time
Payments should be made on time because credit card debt payments on time account for 30-40 percent of the credit score. Maybe use assistance by setting up an alert for every payment or using the bank’s automated direct-debit service.
2.Regularly check your credit scoring
Can check as the ways mentioned above whether Buro Credit Center, ATM, or bank counter, mobile banking or bank’s website which are easier and faster than before.
3.Reduce the amount of current liabilities
Low debt is good for credit scores, as it helps reduce the ratio of outstanding debts. You pay all of your debt if you still have existing debt, but if you can’t pay, you should contact financial institutions that provide loans for debt compromise.
However, in case of default on payment and the loan has been fully repaid, it will be used to calculate credit scoring and remain in the credit bureau for up to three years. However, after three years, it will be deleted and credit scoring will return to a good level if there is no further default on payment during that period.
