When you’re about to get a new loan, you might get the answer from the lender that you’re not eligible for one. Your credit score might be too low, and you need to improve it. If you’re not aware of how this happens, then you must know everything about what affects your credit score and how to improve it.
If you want one of the most asked loans, the forbrukslån, or the consumer loan, you want to have a perfect credit score. This is not always possible as we are all in some sort of debt, but the better your score is, the more eligible for higher amounts you are.
In this article, we’re sharing more about what affects your credit score and what you must do to fix it. Take a look at the list below to see if you’re struggling at some points. If you do, make sure you work smarter in the future, so you don’t get denied for new credits.
1. Bad repayment history
When you miss a deadline and you don’t pay the lender the monthly rate, you’re automatically listed as an untrusted borrower. You go down in the books as someone that misses the repayment and this will affect your credit history.
According to statistics, having a poor repayment history will affect your portfolio with 35% of the overall score. That means, missing payments is a sure way to get a bad credit score and fail to get approved when you need a new loan. See more about it here.
2. Already existing loans
When you have a ton of other credits at the same time, and you ask for a new one, the lender will see you as a risky investment. Their giving credits is an investment. They provide the funds and charge interest, making more money at the end of the credit.
As we all want to make an investment that pays off, so are they. They want to be sure that you’ll be able to pay them back, and if you have other loans, it means that you might not be able to return what’s theirs, making you not eligible for their investment.
3. How much time you’re in debt
When the bank or the other lenders see that you’ve been getting loans for years and you struggle to achieve debt freedom, they’ll know that you’re constantly trying your best to get out of the drowning water. They know that sooner or later, you’ll fail to repay something even if you have everything handled perfectly so far.
This point affects your score by 15%. If you have a long line of credit history, your lender might reconsider if they want to give you the funds. You’re not their best choice if you never spent a day in your life debt-free.
4. How many times have you applied for a new loan?
This is another point that tells your lender that you rely too much on loans. If you asked for credit in the past month, and you failed to get one, be sure that you’ll be denied. The banks and the other institutions want to see that you’ve been living a happy life before you came to them.
Of course, this is not the worst point, and it only affects your credit line by 10%, but when you put everything together, this one might be the drop that will spill and prevent the lender to give you the money you’re looking for.
5. Types of credits owned
There are tons of various credit lines out there. The FICO formula under which the score is calculated will see this one too to create the final number under you’ll be eligible for a new one or not. If you have various loans, you’re considered a bad investment. Learn what FICO is here: https://www.cnbc.com/select/what-is-fico-score/.
If you have a mortgage, more credit cards in debt, got one for buying a new car, then you won’t be eligible for getting a personal loan too. You’ll be declined, and you’ll need to work on it before you’re approved the next time you apply. Get at least two of these to be eligible for the next time you apply.
About the Author
