When you want to obtain a loan from a bank or any other money lender, the only thing that stands between your receiving and not receiving it is your credit score and credit life. Your credit score is the primary and most significant element that will determine your eligibility to obtain a loan. Not only that, but your credit score will also determine how much amount to can borrow, your monthly bill amount and the tenure of your loan. For a money lender, your credit score will help in determining your ability to repay the loan, your current financial status, and debt obligations and how safe a candidate you are to them.
Either way, your credit score is the most important thing and it is your responsibility to maintain a good score so that you are not denied a credit. If you find that your credit score is bad then there are a lot of ways in which you can improve it. Ideally, you are not alone in this world to have a bad credit. According to recent studies and its reports, more than 56 percent of people have subprime credit scores. This means these consumers are at high risk to lenders and have a high chance to get their loan applications summarily rejected.
Know your credit score
To have a better chance to avail a loan you must take proper care of your credit score and review it on a regular basis. A credit score is ideally a number calculated by the credit bureau using all available information in the credit report. Lenders usually offer the lowest rate of interest to borrowers having highest credit scores and vice versa.
At this point, you must also know that to a money lender your credit score is much more important than your credit reports. This is because the scores provide extensive and detailed information regarding your financial history and health with just a single number. However, the trickiest part is that all money lenders will not use the same credit score.
It is the specific scoring model used to calculate that will determine how good a score you have. You may be familiar with the most common model used that provides the standard FICO score. However, there is another other model used for credit scoring called the VantageScore. This model is designed and developed by three major credit bureaus.
Both these models use and emphasize on your ability to repay the monthly bills on your loan on time. It also helps to determine your credit capacity which is the relation between your credit limit and the amount of credit you are using currently. However, the calculating process and mechanism may provide two different weights of your credit-related behavior.
Understand the numbers
Before you visit money lending sites such as or any other you must visit the sites to know about your credit score. Different numbers signify different meanings and implications of your credibility. The numbers are:
- More than 800 – It is exceptional and you are likely to have your loan application approved quickly and easily at the lowest possible rate of interest with no deduction in loan amount.
- More than 740 – It is equally good and you have a better chance to have loans at best possible terms and rate of interest.
- More than 670 – It is a good credit score that will make you an acceptable and reliable borrower to the money lenders. However, you may be asked a couple of questions regarding your credit history.
- More than 580 – It is a fair score but you may have difficulty in obtaining a loan and may have to visit several different money lenders to find one who will agree to give you a loan probably at a high rate of interest for a low amount.
- Lower than 579 – It is a very poor credit score. It shows your real hardships that may have resulted in a bankruptcy even. It shows that you have not built up credit yet and it is high time you start thinking on those lines.
However, you may find a few generous money lenders in the credit market, as there are many such as and others, who might grant you a loan even if you have a low credit score. For that, you will have to pay a fee or even put down a deposit or collateral security.
The factors considered
There are different factors that a money lender will consider and deduces a few important facts when they come to know your credit score, no matter whichever method they follow while scoring you. Your credit score will tell them:
- The amount of credit you have already used from your available credit limit
- The time for which you have used the credit
- How frequently you apply for a new credit
- The types and number of loan accounts that you have currently
- How have you used and handled your credit that was approved in the past and
- Any ongoing legal proceedings against any of your credit.
However, there is no need to be disheartened if a lender rejects your loan application. You still have the chance to formulate a plan to strengthen your credit history irrespective of your present circumstances. This will help you to get a loan in the future.
It is an open secret
Ideally, your credit score is an open secret that the money lenders and banks may access and assess when you apply for a loan or credit card. It enables them to know about your borrowing habits, the spending spree and intent to repay back the borrowed money.
It is your reputation for repaying your debts on time that will make you eligible for a loan and the amount that you may borrow. The credit report will tell everything about your payments on time or any skipped payments. It is ideally a very important tool that helps the money lenders to probe into your financial health and its reasons for being bad.
Author Bio: John Bell has been writing articles on Social Media, a skilled business consultant, and Financial Advisor for the last few years. In this post, he has written about the benefits of Social Media Marketing, Business, Finance as well as the features related to the same.