Your credit score serves the purpose of showing credit companies your footprint in the world of credit. I would suggest you look at your credit report IMMEDIATELY at
Annual Credit Report. Here, you can find your credit report and take steps to improve it accordingly. There is a service provided by TransUnion which costs around $14 a month and it helps you determine goals to improve credit, and ways to monitor your credit activity as well. If you are serious about fixing your credit, subscribe to this (it is called Zendough).*
Your credit score is based on many things. One of them is the ratio between your balance versus credit available. Say you have a credit card with a balance (the $$ you need to pay back) of $1000 and a credit availability of $50. This is really bad, because your balance to credit ratio is very high. This shows that you are only paying minimum payments. To credit companies, you are unreliable, and it hurts your credit score.
Another asepct they look at is the number of quieries. This essentially shows how many credit cards you have been applying to. The more you apply to the more inquiries are done and it hurts your credit because it tells the credit card company that you are looking at more credit instead of using your own hard cash as well.
Credit bureaus also look at your cancelled accounts. If you cancel a checking account, savings account, or credit cards, they may look bad. Talk to the credit card company about their policies regarding this. This doesn't apply to a loan that you have taken, because paying those off is actually very good.
In order to improve this, just as starting steps, you would have to pay beyond minimum every month. Also, try to limit your credit inquiries. This means don't apply to credit cards, store cards, etc. Live within your means and pay off your credit card.
Here is a problem I see in the Nepalese community a lot: people think that credit companies will cancel your credit card when there is a 0 balance left and they don't think you are valuable anymore. This is ABSOLUTELY NOT TRUE. New Congressional regulations have given the consumers more rights and companies need the customer to agree to a cancelation (a 30 day notice). Companies usually do that if you have too many lines of credit from that company and it considers you a risk. For example, if you have four chase credit cards with high balances, then they company may do that. But, again, you will be notified of the action and even given options. You will have just have to talk to the banker/company.
If your balance is low, and your activity is regular (you buy stuff at the beginning of the month with credit card, and pay off the exact amount at the end of the month), then you are considered a good customer and it gives points to you. It shows that you use credit responsibly.
A concept that is prevalent is: some debt is good. Well, it is wrong. Having debt means you will have to pay the interest on it (more likely scenario), which means you are practically flushing the $$ down the toilet! Live within your means and pay off a credit card purchase at the end of the month. For example, if you really wanted to buy that big flat screen TV, you need to make sure that you have the actual $$ in your bank, put it on your credit card, and then pay off whatever you owed IMMEDIATELY at the end of the month. This avoids interest, and you aren't having to pay extra, which is flushing $$ down the toilet.
Nepali people really need a rude awakening about credit card debt. This culture of showing off and living beyond one's means in credit card debt needs to stop, especially because of the weak economic times that looms around the world.
Just my two cents based on some experience. Check with a banker for a more credible resource on this topic.
*Don't enroll in Zendough if you are not serious, because it is a really hard service to get rid of! lol
