We used to think that using the variety of credit options and making on time repayments is a key to perfect credit history and a high credit score. But this is not always true. If a person consumes too many credit products and asks to raise his or her credit limit it can harm his credit by lowering it.
Consumers with Good Credit May Get a Loan Rejection
Let’s take a look at such a situation. Keith Bloom is a school teacher who applied for a home loan. However, he was turned down for this loan because he had a low credit score as it was explained by the lender.
Two years ago Mr. Bloom’s credit score was 690 but this year he accidentally found out that his score is 630 though he had a car loan which he successfully repaid!
What credit score is referred to a good one? Money lending organizations treat the credit score of 690-760 as a proper one. That is why many consumers with lower scores get their applications rejected. Normally it’s better to check a credit score before applying for a loan. In case an individual completely closed previous loans but payments were irregular then it will have negative impact on his or her credit.
The Factors which Influence the Credit Score
There’s a factor which could become a reason to reject Mr. Bloom’s application. When he applied for a mortgage he didn’t have any loan to make payments on. If a consumer doesn’t have a loan or a credit card then it leads to dropping off his credit score. It’s necessary to have an active loan account or a credit card to keep your score in order. But it’s not enough just to own a credit card because it can also pull down a credit. It’s necessary to use this card, at least for small expenses.
Making loan applications too often is also not good. For example, if a person comes to a bank and asks it about a loan then the bank should check his credit score and make a request to a credit bureau. It is still considered as a loan enquiry even though it’s just a check. In case this person goes to another bank the credit will be checked again. Thus, application can be rejected and it can lower the credit score.
Go to the secured personal loans lender or apply for help to the local bank, it’s important to understand that taking out a loan is a serious step. Every loan request can reduce the score by 4-9 points so it’s important to be careful.
Also there’s one more important thing to know. Having several personal loans is not good. An individual who has personal loans and credit cards will always have lower score than someone who has to pay off one or more house loans even if he or she makes all repayments on time.
Using several credit cards and making irregular installments on them is also not good for a credit score.
Now you can see how many factors influence your credit. It’s still necessary to use loans and to borrow money in order to have a good credit score. At the same time it’s important to understand what loan is better to apply for and how often to do this.