It was a chance debate one day among my esteemed colleagues who, fueled by myths and misunderstandings, were being vocal with their “knowledge” regarding credit ratings. As surprising as it was, the more unfortunate fact was that few among the group were aware of the importance of credit score other than in securing credit cards and mortgages. Sure these are necessary for major investments, but what about other liabilities such as your mobile phone contracts? Your credit score affects them too.
Unsure of your basic knowledge? Test it against the following points.
If you are like the majority of people I talked about earlier, you’d have been misled my dear friend, into believing that a rejection by one lender would automatically mean the others will not entertain your application as well. Truth is, they just might. You see, every lender has their own score limit; refusing a candidate is based more on their rocky credit history than the score itself.
Make sure to check your credit report through the different rating agencies available for errors before you re-apply to another lender. Apart from this, there are some too who’d charge a high rate but still agree to provide you with the loan; it’s an option worth exploring.
If you ask the question, “What does your credit score say about you” remember that your lenders are trying to evaluate and predict your behavior – whether or not you’ll default on the loan – based on their assessment of your credit report. So yes, a poor record’s not going to help you much, but having little to no credit history is worse! You aren’t giving them much info to calculate your true worth, are you now?
Show them that you don’t have a habit of defaulting on payment of debts, and are capable of making the minimum requirement. Equally necessary for you to become a customer of a bank is to let them trust you to be a reliable, profitable mortgage borrower forever.
Truth is, your credit is going to cover some basic yet crucial details about you including the spaces available in your application form, credit reference agency file, etc. All of this, besides your individual dealings previously with the lender, is going to affect the outcome of the loan being approved. Certain financial elements missing from your file include your salary, medical and criminal records.
All these, besides your credit score rating, influence the interest rate that you’d be charged with, considering the possibility that they have agreed to provide you with credit.
Finally, despite what your credit score says about you, you can still make adjustments to qualify for a loan or mortgage. No doubt, the process to rebuild a poor score is going to be lengthy, but the sooner you start, the better.
Don’t close an unused card account or simultaneously apply for more credit in a short period. In case of overdraft limit, try not to exceed it because that’d mean you’re not good at managing the credit you’ve borrowed so far. Use your savings to pay off your outstanding debt. You can also be particular about not having a joint financial product with your flat-mate or partner.
(READ ALSO: Advocate’s Tips on Getting a Mortgage with Low Credit)