Your credit score is a big deal. If it is good, you won’t have any problems lending money or getting the mortgage of your dreams. But, if it is bad, you will struggle to find a lender that will take the risk. The key, then, is to make sure that your credit score doesn’t escalate out of control. After all, you never know when you may need a loan or a cash injection to help you in your time of need.
The problem is that everyone can’t have a good credit score. Some of you will have a bad score – that is an occupational hazard of being an adult. The good news is that your negative score doesn’t mean every lender will discard you onto the scrap heap. You can still score highly even if you haven’t made the best choices, and here’s why.
#1: It Isn’t One Size Fits All
Many people think that they have one credit score that banks pass around to each other when you apply for a loan. That couldn’t be farther from the truth because that isn’t how the banking system works. What is true is that each lender will perform a check and come to a conclusion. So, even if one lender does reject you, another may not. Don’t lose heart just because you didn’t get the response you wanted from a lender. Move to the next one and try a variety of them before you consider the alternatives. Who knows, one might use different criteria to judge your application and accept you.
#2: Back To The Future
Although no one can predict the future, it doesn’t stop lenders from trying. When they check your application, they put every piece of information into an algorithm. Their algorithm uses your history to predict your future actions. It is these future actions that banks use to accept or reject your application. Now that you know that, you can start making moves to change your future. Pay off your debts and start paying debts off on time and you will become a more viable candidate.
#3: Risk Is Important, But It’s About Making Money
One myth that you need to forget is that lenders base credit ratings on risk. In fact, they are about a lot more than risk – they are about making money. Banks are money making machines, and they need to ensure that they profit from your agreement. You may think that someone with a bad credit rating won’t make them money, but that isn’t true. You may be a good risk that they will gladly lend to – it all depends on your circ*mstances. If you have a solid income but lots of debt, for example, they can see that you have the cash to make the repayments. Never assume that you are a too risky investment for lenders because there is more to it than risk.
#4: Your Score Dictates Your Rate
One thing that isn’t a myth is that your score will dictate the final rate. Most lenders use a ‘rate for risk’ strategy that gives them less chance of losing out should you default. As such, your score is important because it will dictate how much you have to pay back each month. Your score doesn’t mean that you won’t be accepted, but it does mean you won’t get the best rate possible. Always check your rate before you apply for any loan regardless of the size.
#5: Credit Scores Aren’t Forever
Your score may be negative at the minute, but that can soon change. The trick is to understand how you can change your score, and then implement the ideas to fix it. For example, paying off your debt is probably the best way to lower your score. But, you may also be surprised to hear that applying for a credit card is another alternative. It sounds silly, yet getting into more debt shows the lenders that you can manage your finances. That proves that you are less of a risk, which will encourage them to accept your application. There are several ways to do the job, and too many to mention in one post. For more info, click here.
#6: But You Need A Good Repair Service
Repairing your score alone is hard work. After all, it isn’t your area of expertise. Don’t worry because there are companies that will do it for you if you hire wisely. Like everything in life, though, some are better than others. You want the best credit repair services for the best results. Otherwise, your rating won’t move anywhere, and you won’t be any better off. If you need help, you can always do online research for more information. Or, you can ask your bank. As long as they don’t recommend themselves, they should be able to find you a viable suitor.
#7: You Shouldn’t Shop Around
Shopping around for a better deal is always good advice, but not with your loan applications. The more you apply, the more it affects your score. It is a catch-22, and to be honest, it is pretty shambolic. But, it is the way the system works at the moment. To make sure that you don’t do any further damage, only apply when you know or think that you have a good chance of succeeding. Just like they try to predict your future, you should do the same. Money Saving Expert has a great online tool that allows you to do a ‘soft search’. Soft searches are searches that other lenders can’t see, which mean they don’t impact your score.
#8: Iron Out Inconsistencies
The final thing to keep in mind is that every application you submit should be similar. Obviously, some details will change. However, the simple details like your email address or phone number shouldn’t change. Although they seem insignificant, lenders use agencies to check fraudulent applications. These agencies see inconsistent details as fraudulent, and they will reject your application.
Keep the tips above in your mind and you will always score highly when it comes to your credit rating.
