Today, a person who wants to acquire a loan for anything cannot do so without having a credit background check. Well reputed companies that offer low interest loans do so, on the basis of a credit score, which deems the applicant trustworthy in terms of payment.
By definition, a credit score is a number given to a person after the careful analysis of all their credit files. This number is what determines the creditworthiness of the applicant for the loan. For this purpose, there are numerous credit bureaus that provide their services to both organisations and individuals.
Lenders like banks or credit card companies base their interest rate on a loan and the approval of the loan on this score. Loss mitigation departments of loan companies also have a strict check on these scores so that they can determine whether a customer will bring a profit or loss to the company.
Credit scoring is not something that is just associated with lending and borrowing. The score is also a way for mobile phone companies to determine the trustworthiness of a person regarding their phone bills, which can help them determine what package would be better for each customer. The score is also checked by insurance companies and landlords to determine whether the future tenant is reliable when it comes to paying rent.
So basically, your credit score is the key to everything. It is out there for everyone to see so it is important that you keep your credit score high. Another very important practice is to keep checking your credit score every 3 months. The bureaus that perform credit checks are very professional but errors can occur when there is a lot of data to process.
Order the credit report and see if there is anything wrong that has been updated in your credit report and get it fixed immediately so you don’t have to worry about it when it is time to apply for a loan.
Factors That Make Up Your Credit Score
After application of a loan, some of the things that make up your credit score include:
- Your Salary
- Your age
- The number of children you have
- All the mobile phone contracts that you have had
These are the basic factors that make up a small part of your credit score. Majority of the part is based on things like:
- Previous Loans
- Debt payments
- Credit card usage
- Duration between application of different loans
These things are what initially give you a credit score but what is it that has a positive or negative effect on the credit score?
Registered as a Voter
This may not have a really large effect on your credit score, but it still reflects well on the companies that are performing a credit check on you. [25% of the people within the age of 18-24]/http://www.thisismoney.co.uk/money/cardsloans/article-3031878/Not-registering-vote-hurt-chance-getting-mortgage.html don’t realise that not being on the electoral roll can make your chances of getting a loan difficult.
When companies can see that a person is on the registered voters list, they can easily verify names and addresses of the customer applying for the loan.
Since credit companies want to make sure they get their money back with interest, they will have a look into all your other accounts. Naturally, a current lender would check if there are any other credit card companies that are lending you a significant amount. If this is the case, the current lender would offer you a lesser amount than the one that you require.
Your Credit Applications
For credit companies, a person that has been applying for too many loans is a potential threat for loss. This is because the reason you are being rejected is due to your requirement being a little too high for your eligibility criteria.
If you are rejected for a loan once, do not apply for the same amount again. Check your credit score and look for loans that fit your eligibility criteria. Someone who has very poor credit history might have to take out loans with a very high interest rate and then pay them back on time to get the credit score high enough for your desired loan.
Repayments are Very Important
Repayments, on time and in full, will make a lender trust you more. A missed repayment is something that sticks on a credit report for a least three years and has a major negative impact on the credit score.
The missed payment report is submitted depending on the number of days the payment has been delayed. This could be 30, 60, 90, 120, and 150 days. The higher the number of days, the larger the impact on the credit score.
A late payment can have a higher impact on higher credit scores. Considering a person with a FICO score of 780 who misses a payment and is 30 days late, 90 to 110 points could be taken off the FICO score straight away.
So missing payments is not an option. If you are unable to keep up with your payments, you should contact your lender immediately. Keep a strict check on the dates you have to make the repayment because even forgetting to pay can have a large impact.
In case the debts are becoming too much to handle, a balance transfer credit card is a good way to unify all your debts into one card and having them paid interest free for a longer time.
These are some of the things you should keep in mind the next time you consider applying for a loan. You should check your credit score regularly for errors, typos, and wrong allegations of missed payments. Next time you want to compare your loans before you apply for one, QuiddiCompare can provide you with the best comparison from all over the country. Visit QuiddiCompare and start comparing different rates today.