There are few people who, at some point in their lives, have not gone through a situation that required a credit analysis, do you agree? In these cases, the person responsible for the assessment is looking for a result called a “positive score”. But, after all, do you know what this means? Understanding what a positive score is and how this factor affects your ability to get access to credit can be a great “key” to better managing your finances and even achieving what you so desire. So, continue reading the post and master the subject!
What is a positive score?
A positive score is the condition of your credit score that indicates that you are up to date with your bills and that you have a good relationship with money. Basically, this score is calculated according to your payment habits and your consumption within the credit market. In very simple terms, the score assesses whether you have been keeping your bills up to date and how much you need to resort to third-party credit to do so. For example: if you have barely finished paying off a loan and already need to resort to another to ensure that your bills are paid on time, your score will be reduced, demonstrating that your financial control is not 100%.
However, it is clear that this classification is not just between “good” and “bad” or “reliable” and “unreliable”. There is a real spectrum of scores that you can achieve, revealing to financial institutions and companies in general how risky it is — or not — to offer you credit. The mission of this instrument is to make a kind of prediction of the probability of you honoring (or not) your financial commitments.
To do this, as mentioned, it is necessary to consider whether you pay your bills on time, whether you take out loans frequently, whether you have debts in your name, etc. So, as you take good care of your money, your score will increase.
A positive score is one that is among the highest scores, that is, when your financial life is “in the green”. Consequently, the fewer outstanding debts you have or the less credit you have taken out, the better your score will be, which will avoid a negative score.
Is it possible to have a positive score and not receive credit?
There are specific cases of people who have a positive score, but still cannot get the credit they desire. This happens for very specific reasons, which you will see below. In a very straightforward way, the more bills you have accumulated in your name — even if they are not overdue —, the greater the chances that you will get into financial trouble and be unable to pay off a new debt. So, according to this logic, even if you have a positive score, your score may still not be ideal for credit approval.
Let’s suppose that you pay all your bills on time, but that you have applied for several credit cards over the last year, for example. For some reason, you ended up using the credit limit granted and are paying the amount in installments. So far, so good! Now, imagine that your boss had to make some budget cuts at your employer, which ended up causing you to be fired. Without your salary, the bills got tight, and you started to consider the possibility of a low-interest loan so that you wouldn’t have to pay off your credit card’s revolving credit and not resort to paying off your bill in installments.
Given this scenario, there is a high probability that your loan application will not be approved. After all, according to your previously reported income and the credit limit already used, you would probably exceed your payment capacity. In other words, it would be very risky for the institution to grant more credit.
This is one hypothesis. Another occurs when you have a positive score because you are not in default, but you also do not use any services that indicate that you are a good payer. This is the case of someone who pays all their bills in cash, does not have credit cards in their name, does not contract financial services, etc.
We are talking about someone who does not have a negative history in their name — but, in fact, there is no history at all, do you agree? Just as your credit score does not indicate that the person is a bad payer, it also cannot indicate how positive their relationship with financial institutions is. Therefore, it is as if the result of the analysis was “inconclusive”.
What to do to maintain a positive score?
Now, how about checking out some tips on what can be done to keep your score positive and even among the highest positions? Take advantage of the suggestions to get your financial life up to date!
1. Pay your bills on time
The first step to having a good credit history is to keep your accounts up to date. Even if a debt does not end up negatively affecting your CPF, the outstanding amount remains registered in your name for a while. Therefore, it is essential to keep your payments regular. In this sense, a good tip is to register your accounts for automatic debit, since this way you will not run the risk of forgetting the due date.
2. Take out credit only when necessary
Our second tip is to only apply for credit when it is really necessary. Don’t apply for loans when you can wait a little longer to buy something in cash or just because you “don’t want to run out of money”. In addition to this type of behavior being bad for your financial health, it shows institutions that you are unable to cover your expenses alone. In other words, you need to rely on third parties.
3. Have a positive record
Your credit score and credit history help create a kind of “dossier” of how you use your money. Since 2019, everyone who applies for a loan, takes out financing or makes a purchase on credit is included in this registry. The idea is to provide companies with more information about your financial standing so that they can assess whether or not it is safe to provide you with access to credit.
In addition, your credit history affects your score, generating greater access to credit and, in specific cases, lower interest rates than those offered to those who do not have it. Therefore, keeping your information up to date can increase your chances of gaining access to financial services, such as:
- loans;
- financing;
- credit cards etc.
4. Think like a bank
We’re talking about an exercise that can be quite useful: when you put yourself in the bank’s shoes, you start to better understand how credit scores work. If you’re someone who really needs credit, it’s probably because you’ve been having trouble staying financially stable, don’t you agree? So, this factor could be an indication that it’s time to take care of your financial planning .
5. Organize your finances
Have you ever thought about taking on a personal challenge to organize your finances, pay off all your bills and build up an emergency fund ? This type of initiative can help you never again depend on a positive credit score (and, if you do, it can ensure that the paths will be clear for you to benefit from financial products). A good idea is to set a goal of conscious consumption or to keep only one credit card, for example.