Getting approved for a new home or car is one of the best things that you can have at the age of
30 or so (well, at least for the majority of us in that age bracket). After spending some time on your job saving as much as you can, avoiding eating out and spending too much on things you don’t actually need, it is the thing that you anticipate the most before getting married or while you are in the first years of your marriage.
You’ll probably check and apply to a number of licensed moneylenders in Singapore or anywhere in Southeast Asia to compare terms and see which of them can offer the highest loan amount with a slightly lower interest rate.
Or if you’re not sure what is your credit rating, you’ll end up looking around for a lender that will easily approve your application.
But, how credit ratings affect your loan application?
What is a credit rating or credit score?
A credit rating or credit score is an estimated value of the creditworthiness of a borrower. It will depend on the current financial status of the borrower – whether they still have particular debts or obligation that is currently active.
Corporations and individuals can both receive a credit rating/credit score based on their financial standing.
How credit ratings or credit score affect your loan application?
If you’ve got different loans like student loans, payday loans (a lot since you started working on your job), and all that different kinds of loans, there will be a higher chance that you will incur a lower credit score than the others who do not (as much as they like) get a loan since they started working.
The reason why it happens is that 10% of your credit rating comes from the number of loan applications you make.
But the good thing is, if you always pay your loan in a timely manner, you’ll have a nice credit score compared to people who always send it late. It does reflect your ability to pay future loans in the same manner and you’ll definitely gain the trust of the lender – which means, you can get a loan faster than anybody else.
How your credit rating or credit score can also affect your existing interest rate?
It is not true that lenders check your credit score only once when you apply for a new loan, home, or car.
They regularly review their customer’s credit score status to see if it changed over time.
If it does change, the interest rate might increase. The higher risk for credit rating means a higher interest rate.
That is why it is important to maintain a good credit standing even if you’re not looking to apply for a loan anytime soon.
How lenders decide whether to lend to you?
There are different requirements issued by banks to give you a credit score.
Your credit scoring can be based in various information as follows:
- Everything that you have included on your application form
- If you have been with the lender for a long time, your previous accounts and documents might be a factor that can affect your credit standing
- Your credit report at one or more credit reference agencies
You can get a better credit score if you:
- Registered on the electoral
- Have your own home or living in the same address for a year or more
- Are not connected to people with a bad credit score.
- Have a good credit standing through repaying bills such as gas, electricity, and mobile phones (yes, even this little plan payments is included on your credit score)
How a poor credit rating can affect you?
Poor credit rating or score can result to any of the following:
- Higher interest rates than ever
- Higher interest rates mean smaller credit limit
- You’ll get rejected on a loan application even the first time you applied
How to improve your credit score?
There are some things you can do to improve your credit score or rating:
- Check for mistakes on your current file.
- Pay your bills on time.
- Make sure that a family member where you are in a joint account with doesn’t have a poor credit score, if they do have, this would affect your personal rating.
- Always check your credit report every time you apply for a loan for fraudulent activities.
- Avoid moving into different address a LOT.
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