Your Guide to Loans and How They Affect your Credit
While you don’t have one credit score or report, you will be approved for loans based on what they say about you. Lenders may only check one of the credit reference agencies, but it is possible that they will check all three.
If you are thinking about taking out a loan, there are a few things that you should know about. For example, perhaps you didn’t know that applications actually have an affect your credit score. The more applications you submit, the lower your score will go. Furthermore, you should only borrow what you can afford and consider setting up a direct debit account. Pay off your debt immediately and try to keep your accounts managed. With these and other simple tips below, you can avoid turning a simple loan into a credit nightmare.
Prepare Your Credit before Applying
First, before you even apply for a loan, you should do your best to prepare your credit score. It is best to make sure it is the best shape it’s ever been in. There are many ways you can do this. One is to simply pay off all your outstanding debt. You shouldn’t be taking out a loan with debt, and clearing your record can not only help you pay off a loan, but it will also increase your credit score and lead to better interest rates and fewer fees.
Another thing you can do is register to vote. Even if you’re not interested in voting, registering can help increase your credit score. It is not so much about voting but about being verifiable. Severing ties with a mortgage, a financially irresponsible person, a joint bank account, or another situation impacting your credit will also increase your credit score and boost your chances of being approved for a loan.
Lenders decide to lend to you not just based on what you provide on your application, but what they can find out about you on their own. It is helpful to you if own a home or have lived in the same place for at least a year. It is also helpful to show evidence of your stability.
Having said that, there is only so much you can do. Banks and other lenders will check one to three of your credit scores provided by credit reference agencies and will be interested in your employment history. Where you work, how long you’ve worked there, and how much money you make can all determine if you get approved for a loan and what your interest rate will be.
After you have made your credit as strong as possible, you will be able to apply for loans. Since applications will have an impact on your score, you should do your research and only apply to the lenders you are sure will approve your loan request. You should also avoid sending in many applications. It’s simple. Be careful with who you send applications to and these loan applications will have less of an effect on your credit file.
After you’re Approved
When you are approved for a loan, you will get your money and be able to use it as you see fit. Still, according to the specialists at MoneyPug, a site used to find the best personal loans, the impact on your credit will not be over. There will be lasting effects. The site says that even though you have been approved for your loan if your score is changed halfway through it, the lender may still increase your interest rate.
Then, as you use your loan, it is imperative to send in repayments on time. It is best to pay the lender back as soon as possible. A standard rule is that the earlier you pay it back the better. Not only will it affect your score and remain on your file, if you’re late it will affect your score and ability to secure loans in the future. Paying back the loans in full and on time is the most important thing to keep your credit score strong. Return the money when the lender wants it and you will be able to walk away from the loan without significant debt.
Once the Loan is Done
Once you have taken out a loan and have paid it back, check up on your credit score often. Dispute lines on your file if they don’t reflect your payment history. Keeping up on the credit reference agencies is also key. They make mistakes, after all. By doing your research about loans, paying on time, and focusing on your credit scores, you can take out a loan and avoid all the stress.
Credit loans are notorious for having a significant impact on your credit score, but if you are diligent you can avoid most of these impacts. Make sure your score is at its highest and you will have a lower interest rate. This will not only cost less, but it will also make loans easier to pay back on time. By making repayments in full, and on time, you will see to it that the loan actually benefits you. Stay prudent and you can take out a loan without losing out on your credit score.
Other Related Articles:
- HOW DOES MY STUDENT LOAN AND BAD CREDIT AFFECT MY SCORE?
- PERSONAL DEBT HELP – WHY TO LOOK AT IVAS, TRUST DEEDS AND MORE
- WHAT IS THE DIFFERENCE BETWEEN SECURED AND UNSECURED CREDIT CARDS?
- HOW TO PAY OFF YOUR STUDENTS LOANS FASTER
- HOW TO PAY BACK YOUR LOAN WITHOUT ANY TROUBLE
