What is a Credit Score And How to Increase It?
You’ve probably scrolled through different social media and eCommerce platforms to check how much furniture costs for the home you’ve been dreaming about. Perhaps you’ve also come across the idea of owning your first car or a new phone, or a new laptop and if you don’t have the cash on hand for the things you want to buy right now. You’re probably wondering if a loan, installment or credit card can help you out. If you’re on a mission to find the meaning of the term “credit score” and how you can build one, you’re on the right side of the internet. Read on and see how you can get a platinum credit score.
- What is a Credit Score
- What are the Factors that Affect a Credit Score
- What are Good Scores
- Why Is a Credit Score Important
- How can I build my Credit Score
- Steps on Applying for a Credit Card
- What are the Requirements
- Pros and Cons of Having a Credit Card
- How Can I Check My Credit Score
- Words to Live By
What is a Credit Score?
Right of the bat, as the name suggests it, a Credit Score is the number that is used by companies and banks to determine if you are capable of paying off a loan. You may think to yourself “why in the world would I want a loan?” Simple, unless you have a couple million pesos in your bank account, then you’d definitely need a loan, if you want to buy that house, that car or start a business. These loans are over a wide spectrum of subjects. Some loans are for automotive vehicles while others are for real estate.
Your Credit Score is a combination of several factors. These include your length of credit history, types of credit used, total amount loaned, payment history, and sometimes new credit. Establishing a good Credit Score would be your yellow-brick road to obtaining real estate, automotive, gadget, or business loans.
There is no standard rulebook on how Credit Scores are reported since each of us has different lifestyles and spending habits. In the Philippines specifically, banks refer to a myriad of information to analyze if a person has a good credit score. These determinants will express whether or not a person is eligible for a loan.
What are the Factors that Affect a Credit Score
Payment History
This refers to the level of competency you provide towards paying off your credit or loans. Say for example if you miss a payment, this may cost a demerit towards your accumulated credit score. In terms of point system, continued disregard for paying of your credit or loan may result in a deduction of 90 to 100 points.
Loan Amount
Loan amount is defined by the amount of money you owe from a lending institution. If you’re still a new borrower, you wouldn’t have to worry much about your loan amount because you’ll be starting from scratch first. Know that the larger the amount you’ve already borrowed, the less likely you are to be approved for a new one.
Application Credentials
We’re not saying you have to be a queen of a country to have a good Credit Score. It’s like applying for a university or a company. Let’s say you’re looking for a job and you just accomplished creating your resume. Your resume would work similarly with your credit application with your chosen bank. If you have already had work experience, sometimes this makes you qualify for the position you’re applying for at a better level. Similarly, if you’re applying for a credit card, your existing loans and cards will affect your rating.
Diversity of Credit
This refers to the variety of credit card mixes you own. It could range from mortgages, car loans, or installments you’re paying off for a particular gadget.
Length of Credit History
The length of your credit history depends on when you’ve started owning a credit card, and the duration of time you’ve had at a bank with a different account. For starters who may not have a credit card just yet, you may begin by applying for one with a bank where you already have an existing account with. The chances of winning are higher when you already have a record at the bank you’re applying to.
What are Good Scores
In the Philippines, Credit Scores range from 300 to 850. In this range, 850 is the highest attainable number that one may obtain. Let it be known that the higher your Credit Score is, the more likely you are to be approved when applying for mortgages, car loans, and other forms of loans you may like to apply for.
Financial institutions check a person’s Credit Score upon application to immediately identify how capable the applicant is of paying for their applied loan. For example, if you’re planning to apply for a loan of a million pesos yet your occupation only compensates you with a minimum wage, while you have little number of properties or assets, this means that the amount of a million pesos is an unlikely amount that will be given to you should you application be approved.
Why Is a Credit Score Important?
Countless reasons! First, you may need a loan when you buy your first car, or when you want to move out from your family-owned home into your own personal space. Sometimes you may also need a loan to pay off your tuition fees and miscellaneous, from any level such as undergraduate studies to doctorate. You may also need a loan to jumpstart your business before you have your small business registered.
Others who may already have their respective dreams and careers going on may even be startup owners, and part of their goals is establishing their business. To do so, a loan is another option that is handy. Of course, you don’t want to feel burned out with papers to accomplish where to get the next funding. To make things easier for you and your business, you might want to consider getting a Virtual Office. Think smartly about how you’ll take your next move.
Establishing a good financial credibility will allow you to function easily when you take a loan for your house, condominium unit, car, or business. Keep in mind that when you take out a loan, you’ll be responsible for accomplishing each payment you need to make. Think about it this way, when you make a promise to somebody, it is intended that you keep that promise and follow through with your commitments. Taking out a loan and paying it off works the same way.
How Can I Build My Credit Score
To maintain an excellent, or at least good-level Credit Score there are a couple of matters you need to accomplish responsibly. These responsibilities include:
- 1. Spending Responsibly – Spend within your reach. If you happen to feel sad and want to splurge on a vacation, perhaps you should consider your lifestyle first. Can your bank account afford it? Have you thought twice, or at least 10 times? If you answer these questions with a “No,” then perhaps you should take your choices on a different direction.
- 2. Accomplishing Payment On-time – Being “fashionably late” will never apply towards accomplishing your payments. As soon as you get your paycheck, save an amount that will pay your next bill. Consider it part of your monthly expenditure. Hey, if you’re new to all this, there’s no need to fret. You can do it! You can save for your future! Before you go on all-out sales, take enough discipline to get the future you’ve always dreamed of.
- 3. Settling Existing Loans – If you still have an existing loan, settle it first before you apply for your next one. Say if you’ve already loaned for your startup business, you can settle that first once you receive your return of investment, before you start impulsively applying for a car loan.
If your means allow it, it’s best to begin your credit early. Establishing your credit name and score early while your means allow it, will get you further into receiving a sweet and sound “YES” when you apply for a mortgage, a car loan, or a business. For individuals who aren’t born with a golden spoon in their mouth or any inheritance of a sort, fear not, as you will not be discriminated against when you apply to get your credit score and name on the move.
Steps on Applying for a Credit Card
While there are different types of credit cards and credit limits, before you apply for one, you need to analyze which card is most optimal with your lifestyle. When applying and using credit cards, there is no “one-size-fits-all.” Know that each person is different, and this is why there are also different types of credit cards. Some have annual fees, late payment charges, and exclusive perks. Others, if you’re lucky enough to discover, have absolutely zero annual fees, and each only varies according to interest rates.
When considering the different cards to apply for, ask yourself these questions:
- 1. What will be the main purpose of the card you’re applying for? Would it be for daily expenditures, online shopping, paying off an installment plan, or perhaps it’s just a card to build your credit name and score? Identify the answers to these questions and when you know what the answers are, you can easily proceed to the next few steps of identifying which card you’d like to apply for.
- 2. Are you interested in being furnished with exclusive perks, credits, and rewards? If so, consider which financial institution you’ll be applying for and check if they offer the freebies you’d like to receive. Afterall, who doesn’t like freebies?
- 3. How will you pay for the monthly payments of a credit card? Will the amount you transfer to paying your credit bills be from your monthly salary? Or perhaps you will pay your credit card bills from your newly launched freelance business?
- 4. Are you alright with paying annual fees? If you’re choosing otherwise, then you may want to consider applying for a credit card with a financial institution that offers zero annual fees. You can look up online which companies have zero annual fees and minimal interest rates. You’d be surprised to know that there are countless companies that offer this kind of benefit for their clients.
- 5. Know the benefits. Some credit cards come with benefits such as travel accommodations, free restaurant vouchers, discounts on high-end brands, and countless perks you can enjoy on top of your credit card. These perks come at no additional cost and are already built within your applied credit card. So, before you apply for the card you’d like, do your research. Each of these cards is different, and some are made especially for individuals like yourself who love freebies and zero annual fees.
These are the considerations that you must take to narrow the decision-making process of your credit card application. After making the necessary considerations, make sure that you have the requirements and documentation to submit before you apply for your credit card. Once you have them, you can start the application process with a big smile and get ready to start building your credit score.
What are the Requirements
Step 1: Solo credit card applicants must be at least 21 years of age to be eligible to apply. The applicant must also have a stable income which will serve as payment credibility for the application. Corporate employed, freelancers and business owners of both private and public sectors are eligible to apply for credit cards just as long as proof of income is provided during the application process. Proof of income may come in the form of a bank statement or a payslip from your existing employer.
Step 2: Present your proof of income. As shared in the first step, you will be required to present your proof of income through the medium which you receive it. Do you receive monthly payslips, or are you a freelancer with a different flow of income each month? Whichever category you fit into, make sure to provide the financial institution you’ll be applying with – the income proof that is required in your application.
Step 3: Present documentation that will correctly indicate your proof of address. You may use previous utility billing statements for this as these billing statements indicate your residential address.
Step 4: Have at least 2 copies of your birth certificate ready to submit as you will need these for your application to prove that you are a citizen of the Philippines.
Step 5: Present 2 of your physical ID cards that are photo-bearing as proof of your identity. Make sure to have copies of these two physical ID cards as you may have to submit them along with your application. Know that only government-issued IDs are accepted by financial institutions in applying for an account.
Step 6: Lastly, make sure to correctly fill in the application form of the financial institution. Indicate your name, address, income, and other information correctly to avoid delays in the process of your application.
That’s it! Some financial institutions may require more documentation if you happen to be applying for a credit card with a higher limit, but in general, the above are the basic requirements you would have to prepare before you apply.
Pros and Cons of Having a Credit Card
Pros
- • You have a steady pocket of money which you can use for expenditure, bills, and other payments.
- • You can build your credit score by accomplishing payments on time.
- • You receive perks, freebies, and countless benefits depending on the financial institution you’re applying for.
- • You get to be eligible for larger loans such as mortgages, car loans, and perhaps even business loans.
- • You can spend more easily without having to withdraw cash from banks. You know how it goes; you could even have your credit card number memorized when you use it frequently.
Cons
- • You have the responsibility of accomplishing payments on time.
- • Some banks charge you fees when you pay late, and when you apply for a card that requires annual fees.
- • You have to be responsible for looking after your limits.
- • You have to consider the interest rates that apply for each transaction.
A lot of the cons revolve around paying off your bills. While it may sound unorthodox, all these are just anchored on being responsible for accomplishing your payments and not exceeding your limits. Being responsible with your credit card is like taking care of a dog. You don’t let it go places without you knowing, you don’t let it spend time in a boutique to just pick out which treat it likes. Having a credit card is a lot like having a cat, dog, or any pet. You make sure that it is watched for, taken care of, and does not exceed its limits.
How Can I Check My Credit Score
To find out what your magic number is for your Credit Score, you can simply head down to the website of the Philippines’ Credit Information Corporation. Follow the steps that are required of you to obtain your credit report and wait patiently to receive your credit report.
Step 1: Download the CIBI Application through Google Play or Apple App Store for mobile users. Alternatively, for desktop, laptop, or computer users, you may access the application through the web browser here.
Step 2: Verify your account. Upload the necessary requested verification IDs (accepted primary IDs include: SSS, GSIS, TIN, UMID, and Driver’s License). Upload a secondary verification ID (accepted secondary IDs include: PRC ID, Passport, IBP ID, OWWA ID, Voter’s ID, Senior Citizen ID, Digitalized Postal ID, and GSIS e-Card).
Step 3: Schedule an appointment for identity verification through video call. Appointment schedules are available from Mondays to Fridays beginning from 8:30 am to 5:30 pm. After setting a schedule for the appointment, patiently wait for confirmation from CIBI in your email.
Step 4: Proceed with your identity verification appointment. This process is critical in obtaining your credit report as the verifier would have to ensure that you are the same person requesting your credit report. Dress appropriately in smart casual for the video call that will be held through Google Meet.
Step 5: Pay the required fee through the payment channel you select from among the channels provided by CIBI.
Step 6: When the identity verification is complete and your payment is successful, CIBI will furnish you with a copy of your credit report indicating your credit score which should range from 300 to 850. You will be receiving this document securely through the email address you provided.
With knowledge of the pros and cons of having a credit card, you’re probably on your route choosing which card to apply for next. If you’re still in shaky waters, well it’s all right to give your decision-making process some time. After all, nobody’s rushing you to decide here and now. If you’re just looking to build your credit name and score for your career and future, then you can choose the lighter option of obtaining a credit card that is just within reach. One that does not charge annual fees, nor requires any additional charges.
Stick it into your system that the purpose of a credit card is not to max it out right after you receive it from the financial institution that you applied under. The purpose of having a credit card is to keep your responsibility and discipline intact as you build your credit score. The more you accomplish each of your payments on time, the more likely you are to receive greater loans and benefits when you want to apply for a home loan or car loan. If you’re somebody who’s working for themselves, then you may start small. There’s no issue with starting small or whatever size it be where you start off with.
Words to Live By
As mentioned above, live within your means. If you don’t need a handbag or new shoes, then have the courage to say no to sales, offers, and other unwanted expenditures. Building your credit score as part of your career will open doors for you once you decide to stand on your own feet. While others may eat gold and ride ponies, your hard work will take you further before anyone else because of the discipline you established with yourself.
Be keen on the management of your expenditures, finances, and other budgeting endeavors. If taking notes works best for you, then do so. If your brain works magically that you can remember every responsibility you have, then, by all means, keep it in your head at all times. Just be sure that you accomplish your payments on time and you’re good to go. Paying your bills is as simple as diligently running a business. Say if you’re planning to launch a business soon and you need to loan money before you register your business, you work on each paper you need to accomplish. Make a conscious effort to accomplish your responsibilities on time.
Lastly, growing your Credit Score takes effort. Know that it isn’t just a magic card that gets you on the top charts like a song on the billboards stream. Establishing a good Credit Score comes around your entire lifestyle. How you build your business that is a startup, to how you work with your team members, and how you spend on necessities. Start building your career, work towards your goals, and before you know it, you’re right where you’ve always dreamed of.
