We all are subject to a credit rating system, which very much determines our credit-worthiness, and when you apply for a personal loan or a mortgage, the lender will access your credit history. It is essential to ensure that your credit score is as healthy as possible prior to applying for any loan, and with that in mind, here are a few factors that have a bearing on your credit score.
1. Amount Owed
This equates to the total of outstanding debts at the time of the loan application, and if the borrower is already stretched, it is unlikely a further loan application will be approved. Having said that, there are unsecured personal loans for people with bad credit from reputable online loan providers, and they can easily be found with an online search.
2. Payment History
When a lender is considering a loan request, the main question on their mind is, “Will I get my money back?” A person’s payment history certainly gives the lender an insight into how prompt the borrower has been in repaying previous loans, and while the lender will take other factors into consideration, the borrower’s payment history is a major factor.
3. Credit History Duration
A lender will take into consideration how long a person has had access to credit, whether you have been borrowing money for decades or just a few years can have a bearing on the outcome of a loan application. Get tips on how to budget your salary through a quick search for related articles available online.
4. New Credit
How many loans have you taken out in the past 12 months? When a person actually applies for a loan, this data is recorded, yet it is different to requesting your current credit rating, which does not affect your credit score. If the lender feels the borrower is over extending, they might reject the application, unless, of course, you approach an online loan provider, who can even obtain a loan for those with bad credit.
5. Types Of Accounts
A small percentage of a person’s credit score concerns the various types of credit they are currently using; mortgage, credit card, home improvement loan, would all figure in this. A person applying for a home loan, for example, might be rejected if they have just applied for several credit cards, as this poses a risk for the lender.
While the traditional money lenders such as banks and finance companies might regard a borrower’s credit score highly, there are online loan providers who can help those with a less than perfect credit score. If you would like to take out a short or long-term personal loan, the online provider can quickly give you pre-approval, and in most cases, the funds are in the borrower’s account the same day.
If you should ever apply for a home loan, you are advised to check your credit score prior to applying, and should there be any outstanding debts, they should be cleared by taking out a small personal loan.