It’s not a number you may think about often, but your credit score defines your creditworthiness to a lender.
In other words, reputable lenders evaluate how likely you are able to pay back a loan based on your past financial conduct. Generally, big banks have stricter criteria when assessing loan applications, especially in slower economic times.
The lower your credit score, the more likely a lender may decline you, as they may believe you could have trouble paying off a loan. Lender rejections contribute to a lower credit score, making it difficult for some to escape the cycle of weak creditworthiness.
The higher your credit score, the higher your chances of getting approved for a loan. Not only that, those with stronger credit records may be able to save money in the long run as reliable borrowers are coveted by reputable lenders.
If you don’t know what your credit score is, it might be a good idea to find out, as one day you may find yourself urgently needing to improve your rating for a loan application.
Here are some tips to give your credit score a boost and ensure your future loan applications are rock solid.
- Check your credit report – As your credit score is based on the information in your credit report, it’s worthwhile to understand it. Look through and make sense of how each listing might have contributed to your credit rating. There’s also the chance that errors have been made by either a lender or the credit reporting agency. If that’s the case, get in touch with the relevant body and request an amendment.
- Don’t make too many loan applications – Refrain from making multiple loan applications in a short span of time. Every loan application you make and every rejection you receive will appear on your credit history. These listings can make you look unreliable to future lenders.
- Work on your existing debts – Being debt-free or having fewer debts is a plus to lenders when assessing loan applications. If you’re in a position to, try getting rid of any existing debts you have. You can do this by making contributions on top of your minimum repayments. Keep in mind some lenders may charge fees when you make extra repayments.
- Build your savings – Another thing that will give lenders a positive impression is having a nice stash of cash in the bank. As lenders usually need to see your bank statements from the past three months, a track record of consistent savings will pay off when you apply for a loan.
- Don’t make late payments – You might think you’re safe by not missing any payments, but late payments may still weaken your credit score. If being tardy can cost you money in the long run, it could be worth your time to be punctual with your mortgage repayments, rent, credit cards and utility bills.