If you’ve ever been refused a personal loan or a mobile phone contract citing your credit rating as the reason for the refusal then you know by now how important the financial concept is. Whether you like it or not, you need to do what you have to do to keep your credit rating fair, good or even on the excellent side of things. Otherwise, you’ll end facing consequences such as loan rejections, high interest rates and more inconveniences than necessary.
To get you started on the right foot, here is a list of things you need to know about your credit rating:
There’s no such thing as a universal credit rating.
Contrary to popular belief, you don’t have a universal credit rating. There’s no such as thing as credit blacklists either. If you got rejected from one lender, it doesn’t mean you’ll get rejected from every other lender. Remember that lenders use different criteria to score you. While it may be harder to find a personal loan when your credit rating is poor, you’ll find that there are actually firms willing to lend you money. The trick really at the end of the day is to find the right lender.
Credit rating is not just about your capability to pay.
When lenders check your credit rating, they’re not only doing it to determine your financial capability. But more, they’re doing it to predict your future behavior as consumer and borrower. If you’ve been a good payer but missed a step because of unemployment as indicated on your credit files, for example, then you’ll have higher chances to get approved if you found a job now. Your credit history, in this case, matters. If you have little to no credit history then you have a lot of work ahead of you.
Credit rating is more about how much lenders will earn.
If you have a perfect credit score, you might think that you’ll get approved for a loan in a blink of an eye. Sadly, that’s not always the case. At the end of the day, financial firms are all about making money out of customers. They can make the most money from customers with a credit score that’s not always perfect. If you’re always repaying your credit cards in full and your bills on time, you can still get a rejection. The reality sucks, we know, but that’s how it is in the leading market.
Credit rating affects the rates you’ll get.
If you have a poor credit rating and you need a loan you’re financially capable to handle, you’ll get approved for the loan but there’s a catch. Your interest rates may be higher than if you have a stellar credit rating. Lenders, nowadays, check customer credit files for the purpose of determining how much risk you pose. The higher the risks, the higher the interest rates they’ll charge your loan. And this rate to risk factor is especially manifested on the representative rates you’ll be offered on your personal loans.
Credit scoring can affect you in more ways than one.
Your credit score may just be a number but it can affect major areas of your finances if you’re not careful. As much as possible, it’s best to maintain a good credit score. Otherwise, you’ll be putting financial areas such as your mortgages, credit cards, personal loans, utility bills, insurance and even your mobile phone contracts at risk. You’ll not always get a rejection but you can expect to get more expensive rates if you have a poor credit rating.