Credit Score 101: What Filipinos need to know

It’s pretty convenient to just swipe our credit cards every time we shop. However, we should be more responsible with our spending so we’ll be able to apply for loans when we need to and prevent ourselves from sinking deep in financial debt.

Most Filipinos don’t know what a credit score is — it’s the data that greatly influences the approval of loan or credit card applications and its interest rates. Credit score is a decision-making tool for lenders to help them determine if an applicant is credit worthy.

In the U.S, credit scores are scaled from 300 (lowest) and 850 (excellent). Credit card scores may differ between lenders and usually uses 3-digit credit score to determine a card holder’s eligibility.

So the higher scores you have, the higher chances of getting approved.

But first, you should have a credit history for you to have a credit score. A credit history is an account that shows how responsible you are in repaying your debts. And once you have opened your credit card account, you can track your score if you continue using it for more than 6 months.

Here are some steps to manage your finances closely and have a favorable credit score:

Establish an early maintenance of credit history
It is important to build and maintain a credit history. Paying regularly ensures a good banking record and thus, good credit score.

Pay your bills on time
Late or irregular payments are a big NO in maintaining a positive credit score. Paying bills on time shows that you are capable of managing your own finances.

Don’t exceed your card’s limit
A credit balance that is higher than your existing credit limit is a red flag for most lenders and banks and can lead to low credit scores.

Manage spending
The rule of thumb is to limit spending and credit card usage to prevent low credit scores and financial mismanagement in the future.

Credit reports and scores have a huge impact on a person’s financial reputation. Be financially literate and enjoy your good credit standing!