Your credit score can impact your ability to get a loan, a car or a new home. More than 90% of top lenders and other financing institutions use credit scores to help them make the least risky credit-related decisions. Unfortunately, many still do not understand how it can impact their lives.
Here are some of the most frequently asked questions regarding credit scores.
What is a credit score?
Your credit score is not your credit history.
To clarify, your credit history is your recorded information from your past loans and credit transactions from banks and legal financing institutions. If you get a loan or you apply for a credit card, the financing institution would want to know if you can handle the financial responsibilities. Understandably, they want to give loans and credits only to those who can pay.
They will ask the credit agency bureau for your history. From there, they will give it a score based on the credit scores created by Fair Isaac Corporation (FICO). And though there are some institutions who do not use FICO, they are able to create their own credit scoring system.
Based on these score, they will decide if you are creditworthy or not. If you do not have a credit history yet, it is possible to get a loan from a cash mart sg moneylender. They are the licensed money lenders who are mandated by law to report the borrowers’ credit history.
To easily start getting a good credit score, you have to get a personal loan from a lender included in the licensed money lenders list. Once you get approved, you need to pay your quick loans on time. Your good payment behavior will then be recorded for banks and other institutions to see.
What information is the credit score based on?
The credit agencies do not get your banking details. They only record your name, birthdate, address and social security number for proper identification. These factors are not used when it comes to scoring.
Add to that, your credit history will include your established credit accounts, the date you opened the account, amount of loan, type of credit and your payments. Every credit inquiry will also appear in your credit report. This means a lender will see if you have made multiple loan applications.
Finally, the credit report will also contain civil lawsuits, bankruptcies, and information about your overdue debt from collection agencies.
Is sharing my credit history legal?
Yes, it is. In fact, the law mandates all banks and other legal financing institutions to report the credit information of borrowers. The strictly share only the needed information for identification and scoring purposes. This does not include your banking and other financial information.
Credit scoring is beneficial on both the lenders and the borrowers. For borrowers, they can avail the best credit options if they are considered as creditworthy. The loan application can also get faster since there are now credit history within the lenders’ easy reach.
As for lenders, the credit history will help with the credit approval decisions easier. They can easily see if it is risky to approved the borrower’s application
Can debit cards help build my credit score?
Debit cards are not considered as tools for credit. It is simply using the money you already own. As said a while ago, your banking details and non-credit transactions are not included in the credit history. No matter how you diligently use your debit cards, it will not help with building your credit score.
Will closing a credit card pull my credit score?
One of the factors that affect a credit score is the length of the history. If you close a credit card that you have been using for years, you will lose part of your credit history. It will decrease your credit score. It is best to keep your first credit cards unless you have a strong reason not to.
Can my higher savings in banks increase my credit score?
Your bank details including your savings do not have any impact on your credit score but it does help your financial stability. And even if you have enough savings, it helps to utilize some loans and mix with other types of credits.
Your credit score is based on payment history, types of credit accounts, applications of new credits, length of credit history, and credit utilization. Getting a loan and paying it on type will build a sturdy credit score.
Can I still get a loan despite a bad credit score?
Absolutely! You can get a bad credit personal loan. When you have a bad credit score, it would mean that you are a risky borrower. Banks will decline your loan application but licensed lenders will approve your loans albeit with lower amount.
Will my loan amount affect my credit score?
Your loan utilization can affect your credit score but paying it on time will yield a better score than the previous one.
Let’s say you got approved for a mortgage. Your credit score will initially take a dip since your loan amount is high. But as you diligently pay each month, you can easily regain your credit score.
Who can check my credit history?
There are a couple of people who can access your credit history: you, the financial institution you are applying to, utility companies, and insurance companies. Sometimes your landlord and employers will inquire about your credit history.
Can credit history be cleared?
You can’t easily clear your financial delinquencies. Even bankruptcy is retails for seven years. But you can still make a way to increase your credit score by paying your existing loans and credit card bills on time.
Your credit score is an important factor when buying a house or a car. Make sure that you take care of it for smoother financial transactions in the future.
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