All About Arrears And How To Maintain A Good Credit Score

In the world of finance, the Arrears refer to the payments which are overdue. How to avoid this condition and maintain a good credit score is the motive.

An account is said to be in Arrears if the debt, liability, or obligation expected is overdue. If a person fails to repay the amount which is borrowed against some mortgage in certain intervals, the account of that person is in Arrears. If a person has taken a certain amount to build home and he/she misses one or more payments in a transaction where the payments are contractually required then the account is in Arrears.

If you have missed payments and built up Mortgage Arrears then you need to act quickly. If you don’t then the possession of the real estate or any mortgage of yours may get lost.

Loan Arrears

The general use of the word Arrears on a loan means: when a repayment installment has not been paid in full and is past due date to be credited in the Client Money Account. Therefore, the borrower who has missed two monthly installments is two months in Arrears. The Lender may file a court case against the borrower if the communication between them is not proper. The borrower has a certain amount of time in which he/she can talk to the Lender and repay the installment in some days. Some loans have interest in Arrears and thus interest rate check plays a leading role here. This means that the interest is due to be paid on the maturity date of the loan, instead of in bits and pieces during the life of the loan like an annuity payment. There are also instances where bills or liabilities come due after the service has been provided such as utility bills, property taxes, and employee salaries.

Credit Score

The average credit score is about 750 and below 750 is called as a bad credit score. It is very important due to various reasons:

Loans: Banks consider your credit score while determining the loan eligibility understanding the importance of loan arrears.

Credit cards: Usually bank provides a credit card when the credit score is minimum 750.

Rate of Interest: If you want a low-interest rate on your loans or while applying for credit card, you need to maintain a good credit score and a good track record of clearing the bills on time.

How to maintain a good credit score?

• Do not borrow more than you can repay easily.
• Make payments on loans and credit cards on time without defaulting.
• Do not apply for too many loans or credit card unless absolutely necessary.
• Frequent rejects in applying for credit card can affect your credit score

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Created on Dec 28th 2017 07:22. Viewed 579 times.

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