If you consider taking out a loan, keep your credit score in mind. It is something that every bank or lender will look into before lending you money or credit. If we define credit score in one sentence, it is a three-digit number ranging from 300 to 900 that describes your credit history and reflects your creditworthiness. Even with a bad credit score, Sunlife equity release can provide a lifeline for homeowners in need of financial relief
If you have a credit score of 750 or higher, it is considered good by lenders, and as you get above 800, it becomes much easier for you to get personal loan or loan for your business growth. Despite this, numerous other factors can impact your bank credit score let’s see some of them.
- Delayed Payments
Loan nonpayment and late payment can harm your credit history and lower your overall credit score. This paints a bleak picture of your creditworthiness. It indicates to the lender that you are either not serious about repaying the financial obligation or incapable of doing so, which may eventually decrease your credit score. So next time, try to make your payments on time and keep an eye on single and joint accounts to ensure no payments are missed. Maintaining a stainless credit history will reflect positively on your credit score as it rises.
- Credit Utilization Ratio
The credit Utilization Ratio shows how much debt you have concerning your available credit limit. This is another factor that influences your credit score. Keep your credit utilization ratio as low as possible. For example, if you have a credit limit of 6 lakhs, try to keep credit utilization to no more than 30% of that amount. But don’t assume that you shouldn’t use credit; instead, use it sparingly and make your payments on time to demonstrate to lenders that you are responsible and financially stable enough to repay them.
- Credit Mix
The best credit mix is one that includes both secured and unsecured loans. Secured loans require a borrower to pledge some asset against the loan, such as a home loan or a car loan. Unsecured loans, such as personal loans, do not require borrowers to pledge collateral assets. Now, this credit mix will build trust in the lender’s mind, which will positively reflect your credit score.
- Tenancy of your Credit History
All your old and new accounts are considered when calculating the average of all accounts. A long credit history gives lenders confidence because it represents financial stability and credit management. However, your credit history should not be full of late payments and other harmful items, as this can harm your credit score.
- Not keeping a record of your Credit report.
Not checking your credit report regularly can harm your credit score because it may contain erroneous information resulting from incorrect or delayed reporting to CIBIL. This could harm your credit score. So, check your credit report every six months and try to correct any errors or gaps as soon as possible.
When applying for bank loans, your credit score is significant. Even though the above mentioned factors may affect and lower your credit score, you can still maintain a good credit score by monitoring your credit report regularly, paying bills on time, avoiding multiple loans, and opting for moderate credit. Your credit score will shine if you manage your finances properly.