As the American economy gradually pulls itself out of the recession, consumers are seeing their own financial health improving as well.
Many consumers may have found themselves under mountains of debt and late payments in the past few years, and while lenders may have been somewhat understanding given the financial climate of the time, granting consumers some leniency is no longer tenable, reports the St. Louis Post-Dispatch.
With lenders setting harsher standards for giving out loans, it is now more important for consumers to keep an eye on their credit score than it has been in years. While some aspects of their financial health are beyond their immediate control, the paper said there are a number of steps consumers can take to help themselves.
The paper said that it's important for consumers to limit how much they must pay their creditors per month. The general rule of thumb is that monthly payments should never exceed more than 20 percent of a consumer's net income.
It's especially important to keep this in mind when considering that the median credit score across the country is above 700, one financial expert told the newspaper, and 700 isn't even a good enough score to get the best rates on various loans. Those come with scores above 750, and a score between 710 and 750 will garner strong rates. Consumers will find mediocre rates if their score is between 650 and 710, and fairly tough rates if their score is between 580 and 610. If a consumer's score is anything less than 580, the rates will be awful if the loan is approved at all.
The report also said that some banks are impacting their customers' credit scores because of their own financial problems. Lenders are changing rates or cutting credit limits as a result of financial problems on their end. While this can be tough for some borrowers to deal with, it is a fact of life that borrowers and lenders alike should be more careful with their finances.
The paper advised that any consumer having problems paying their bills never duck their creditors, but rather contact them and explain their situation.
A report in the Salt Lake Tribune said that one new way to quickly repair a credit score is to make small payments on outstanding debts several times a month.