Knowing and understanding your credit is very important especially if you have a financial investment plan. Lenders check your credit history to see whether can qualify for any loan approval. Having a bad credit history can make it hard for you to find a loan as lenders check your credit worthiness.
If you have a good credit history, you can get quick loan approval at favorable interest rates. Your borrowing history is always summarized in your credit reports, making them available for your lenders.
You cannot build your credit overnight. Various credit bureaus help in tracking down credit reports and give access to the lenders. Let’s now look at how credit system works.
Credit bureaus provide a lender with your credit report and credit score as well. They collect all the information that appears in your credit report. These range from card issuers, banks, and other voluntary credit providers. Despite being trusted to store the financial data of millions, it still doesn’t keep much data.
After they’ve provided your credit information, reporting agencies will distribute and sell the information whenever you apply for a loan. Some of the available credit unions include Equifax, Transunion, and Experian.
Ensure the information provided in the credit bureaus is accurate. In case of errors, don’t hesitate to contact the relevant bureau which generated your report.
Credit reports play a very crucial role in your credit worthiness. It gives a summary of your credit history for not less than seven years. Records contained in your credit reports include foreclosures, bankruptcy, repossessions, and credit inquiries for two years back.
This also includes payment history and borrowed amount. It also gives a record of the loan you took in the past and the current loan.
Credit reports serve as the raw data for your credit scores since they allow lenders to access whether you qualify for a loan or not.
Lenders consider taking specific information from your credit reports before they make any lending decisions. Make sure you check on your credit reports and identify any issues before applying for a loan.
Even with bad credit history you can qualify for a personal loan if your credit reports look good. Financial institutions are not legally mandated to report the account’s information to the credit reporting agencies.
Therefore, you’ve to be aware that not all credit activities improve your credit history. You can as well get your credit reports for free as stipulated by the federal government.
Lenders use credit scores before they decide to give you a loan. Credit scores are numerical representation which includes information of your credit report. They give a clear indication of your credit status.
The widely used model of credit score is FICO. It ranges from 300-850. For you to achieve good creditworthy, your credit score should be higher.
But your chances of getting credit are minimal if your credit score is lower. A lower score shows that your credit history is generally poor. However, lenders have different standard for credit approval and you might still get a good loan with a low score.
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