Question

In: Finance

research how you might get a favorable credit rating

research how you might get a favorable credit rating

Solutions

Expert Solution

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.


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