Introduction:
Credit rating is analysis of risk
related to financial instruments of financial entity, it is very
useful to know the financial soundness of any business or entity.
It is used to predict the ability to pay back the debt. Credit
rating agencies do this task for the business in market by charging
their fees.
They analyze the business under
pre-decided standards and gives rate to business. The unpaid debt
affects the positive credit ratings and drives towards negative
ratings.
Good credit ratings in past
indicates the timely payment of debt or loans and that can motivate
the banks and financial agencies to lend money on the basis of good
credit ratings. So, it is very important to maintain good credit
ratings continuously.
How you might get a
favorable credit rating?
- As we have seen through
introduction debt payment can affect the credit ratings the most.
So for favorable credit ratings the business should pay its debt on
time.
- Understand and be clear about the
rules, regulations and standards of credit rating agencies and try
to match that standards in every way.
- The business should pay all its
bills on time, so that creditor’s reports create positive impact on
credit ratings.
- Try to decrease credit use very
much for that limit your debt and expenses that will automatically
help to limit the use of credit.
- Try to lower the risk level. Avoid
taking money from risky funds and avoid any activity that may
increase risk in future because high risk affects the credit
ratings negatively.
- Correct mistakes in business
reports, keep everything clear and transparent that will help the
rating agency to analyze the business easily, avoid any mistake in
credit reports to get good credit scores.
- Cash withdrawals from credit cards
is not at all wise decision because it charges high interest so be
careful while using credit cards and just avoid creating inquiries
about credits.
So, as discussed above the major
points to focus on for favorable credit ratings are timely payment
of any small or big debts and use of credit wisely. Maintaining of
good credit ratings is very important for current and future
ratings.