Banks thoroughly approach the consideration of loan applications. They look at the credit history, evaluate the credit rating and debt burden of a potential borrower. If something is not to their liking, the loan may be denied. We have studied the factors that can ruin your credit score and how you can improve it.

Credit history

The borrower's reputation is made up of a credit history, i.e., a list of closed and existing loans and dates of delays in payments, as well as a credit rating - an assessment as a whole for the entire time a person has applied to banks.

In fact, a credit history is a document that does not contain any evaluation information but is only a dry report on what loans the borrower took or planned to take and how he fulfilled his obligations.

Factors that reduce the quality of credit history:

· delays (frequent and long)

· debt collection judgments

· record of the borrower's bankruptcy proceedings

· frequent refusals of credit organizations in issuing a loan

Credit Repair Ease will help you find out your credit history.

Credit rating

A personal credit rating, unlike a credit history, contains analytical information about the assessment of the borrower's ability to fulfill debt obligations in a timely manner. The score is calculated based on the history of repayment of loans and the presence of delinquencies. The assessment is also affected by the level of debt burden, the number of requests for loans, the number of loans received from microfinance institutions.

The higher your personal credit score, the more likely you are to get a new loan. The range of creditworthiness looks like this:

· Low: 300-629

· Average: 630–689

· High: 690–719

· Very High: 720-850

That is, a person with high and very high creditworthiness is more likely to be approved for a new loan, while a client with low creditworthiness is more likely to be denied a new loan.

There are situations that do not directly affect the score but are an additional factor that reduces the attractiveness of the borrower in the eyes of the bank. For example, repeated quick early repayments of loans or refusal of an already issued credit card. The repetition of such cases is assessed negatively by the bank.

A risk factor is also a large number of applications to different credit organizations, especially if among them there are pawnshops, MFIs, consumer credit cooperatives and agricultural consumer credit cooperatives. The refusal of one of the creditors may alert, after which the client begins to hastily sort out other options.

Many believe that having no loans guarantees a perfect credit score, as there have been no delinquencies or bankruptcies. This is not so: the complete lack of credit experience is the same negative factor for the credit rating as the debt load of the borrower.

How can installment plans ruin your credit score?

Experts recommend being wary of the installment plan offered by many hypermarkets and online stores. It should be borne in mind that the store cooperates not only with banks, but also with microfinance organizations (MFIs). Often, when POS-lending, an application is submitted in a fan, i.e., to several credit institutions at once. The store is interested in buying goods, so it does not matter to him who exactly will be ready to provide the service. And the buyer often does not know or misunderstands in the hustle and bustle that he is taking a loan from an MFI.

Microfinance organizations have more loyal requirements for borrowers than banks, they are not so categorical about credit history and income levels and are also more focused on small loan amounts. How the presence of a microloan in the future will affect credit relations with banks depends on the particular credit institution.

Important!

When agreeing to arrange an installment plan for goods in a store, it is important to carefully read the terms of the contract and be aware of who is taking the loan.

How to improve credit history?

Simply erasing a bad credit history and improving your credit score for no reason is impossible. This requires time, effort and a clear algorithm of actions. The first thing to do is to pay off delinquencies and non-credit debts (fines, taxes, utility bills, alimony, etc.).

Next, you should try to take a loan and avoid violations in its repayment. If the bank sees that the borrower has improved and become trustworthy, he will reflect information about this in the system. Over time, your credit score will improve.

Some banks offer special credit rating enhancement programs. As a rule, they involve issuing a credit card with small credit limits. After a certain period, the bank will be ready to provide a regular loan. The bank where the client already has a deposit, or a salary project will be more willing to issue a loan. 

There are times when mistakes are made in the credit history. For example, a loan is indicated that a person did not take, or there is information about supposedly overdue loans. This can happen due to a mistake by the lender's employees or fraudulent actions of intruders. You can’t let the situation take its course - it’s important to understand the reasons and try to fix your credit history. To do this, you need to apply to the credit bureau. BKI employees will double-check the data by making a request to the creditor, and within 20 working days they will give a reasoned answer on making changes to the credit history or on refusing to do so.

From January 1, 2022, the borrower is also entitled to apply directly to the lender with an application to contest the information. He is obliged within 10 working days to provide confirmation of the accuracy of the information or correct the credit history by sending the relevant reliable information to the credit bureau.

Credit history reflects the financial reliability of a person. It can be requested by a variety of organizations, and not only financial ones. The information may be of interest, for example, to future employers, as well as various services that require an understanding of the responsibility of a potential client, for example, when renting a car. Therefore, it is so important to monitor your credit history in order to correct it in a timely manner in case of deterioration.

Just single call on  (888) 803-7889 and fix your credit score now.