Some shortcomings are easy to fix, while others are best avoided.
Credit history is data about how often you ask for a bank loan and how disciplined you are to repay. Credit institutions use it to figure out whether to give you money and on what terms. If the story is bad, you will face rejection over and over again. Several common mistakes can make it worse.
1. You do not pay on loans
Any delays are bad. But it is especially dangerous if the pause in payments lasts more than three months or the bank has dealt with you in court. Such loans will be marked in history as negative. The word itself hints that this does not mean anything good. Not every bank will contact a person who has already proven to be an undisciplined payer. There is a risk that the delay will be repeated, and this is an extra headache. The more negative loans, the lower the chance of getting another one.
Also read: How to Choose a Debit Card
What to do
You need to deposit money on time. And for this, you need to soberly assess your solvency in advance and make sure that you can afford to repay the loan.
2. You accumulate debts
Credit history includes not only data on loans. It will also reflect debts on payments for housing and communal services, alimony, fines – all your official obligations. True, only if these non-payments are confirmed by a court decision and not executed within 10 days.
What to do
Do not bring it to court. Pay off your debts on time.
3. You are submitting too many loan applications
The credit history shows the total number of applications and the number of approved and rejected applications. The bank considers the statistics to be bad if:
- There are too many applications, especially in a short period of time. This may mean that you are not doing very well with finances. So much so that you bombard all kinds of lending institutions with inquiries and are not choosy about your financial relationships.
- You have many rejected applications. If other organizations have not entrusted you with their money, this bank should be on its guard.
What to do
If it becomes necessary to take out a loan, first study the conditions offered by different banks and contact a specific one. Suppose they refuse – another one. But submitting multiple applications at once hoping that the loan will be approved somewhere is a losing strategy.
Banks are not that scrupulous about mortgages. It is quite possible to submit several applications here to see what conditions will be offered to you.
4. You frequently change personal data
Personal information changes in credit history every time it is updated in applications. And this is reflected in the document over time. A person can move, change their phone number, or even their last name – this is normal. But, if he does it every three months, everything looks more than suspicious.
What to do
Perhaps you have a logical explanation for the frequent data changes. For example, say you moved three times in the last three months because you sold your apartment and lived with relatives while you bought the next one. But now they have settled in new housing. Try to tell you about it in advance when communicating with the bank manager.
5. You have too many active loans
The bank looks at how much you pay every month to calculate your load limit. The more your income you spend on paying off your credit debts, the less desirable a client is. It is worth focusing on the figure of 50% of earnings. When your monthly commitments exceed half your income, you are at risk.
What to do
If you are getting close to the specified border, it is worth reconsidering your financial behavior and thinking about dealing with loans quickly. This is not necessary at all to correct history, to collect new loans. It is simply that an extremely insecure financial situation is developing, in which any shock can lead to problems.
6. You abuse microloans
There is nothing wrong with microloans in and of themselves if they are used as intended. Namely, take a small amount in case of an emergency, considering that you will have money for repayment shortly. If you occasionally apply to microfinance organizations, there will be no problem.
But if you are a frequent client of theirs, banks may question what is wrong with you since you constantly take money at a huge interest from MFIs instead of turning to them.
What to do
Take microloans only when you absolutely cannot do without it.
7. You repay loans ahead of schedule
In general, this cannot be called a mistake. If you have the opportunity, pay off loans ahead of schedule. This way, you will save on overpayments and get rid of this headache sooner. But we are thinking in terms of credit history. And the bank may not like that you are not letting him make good money for you.
On the other hand, when you took out a loan and gave it ahead of schedule, you still paid the institution more than if you hadn’t applied there at all. So not all banks consider this provision of credit history seriously.
What to do
Just remember that early repayment of the loan, especially the repeated one, maybe why you will not be given the next loan. If this worries you, try to repay only large loans ahead of schedule and give small loans. The latter has a small overpayment.
8. You don’t check your credit history
The quality of your credit history does not always depend on your actions. Sometimes it can deteriorate for the following reasons:
- Personal data problems. For example, you have entered your full namesake’s information, and now, on paper, you are a persistent defaulter. Or, on the contrary, they did not enter data on your good faith because your surname in your credit history is spelled with an error.
- Scammers who have collected loans in your name. Bad credit is not the worst consequence here. If you let everything go by itself, the money will be required from you.
- Lender’s mistakes. For example, you repaid a loan. But the bank manager did not tick the right box, and the data on delinquency went to the credit bureau.
- Bank tricks. Sometimes you refuse to take an approved loan, and the credit institution sends data that it allegedly refused you.
What to do
It is worth checking your credit history periodically. You can do this twice a year for free. If implausible data fell into it, you have the right to dispute the information and obtain corrections.
Also read: 8 Common Reasons Why Your Salary is Not Growing.
9. Do not take loans
From common sense, this is the correct strategy. But we are talking about credit history, and if it is empty, then it looks suspicious. The bank receives data about a potential borrower and understands what to expect from him. The man who never took out loans is a mystery. And some institutions may decide not to risk it.
Mortgages stand out again. The chances of getting it are high even with zero credit history. It is much more important to confirm the ability to pay.
What to do
If you are willing to make some sacrifices to improve the story, you can buy something small on credit, such as a smartphone, and give the money right on schedule. But you can get by with a credit card. Pay her purchases and pay off the debt in an interest-free period.
10. You are in litigation with creditors
If you have resolved disputes with the bank in court, then information about this may appear in your credit history. Such data does not automatically enter the database – your opponent must take care of this. For other lending institutions, this will signal that you are a problem client.
What to do
There could be a recommendation not to sue, but this is not the case. If the bank violates your rights, defend them. It is better to successfully resolve the current situation than to lose money in the name of future loans. So this paragraph is just information for thought if you do not understand why the bank refuses you.
Adapted and translated by Wiki Avenue Staff
Sources: Life hacker
