If you have applied for a loan and been denied, it may be because your credit rating is low. But what does low credit really mean? Here on the site we have gathered everything you need to know about creditworthiness and how you can influence it.
What does credit rating mean?
Your credit rating and current finances are what will determine your chances of granting your loan. Your credit rating partly tells the lender how likely it is that you can repay the loan on time. Your credit rating or credit rating can be compared to a financial trust – can the lender trust that you will repay the loan? To get your credit rating, they take a so-called credit report or credit request.
The choice of credit management companies differs depending on the bank and lending institution. Some use the Information Center, UC, others may use Creditsafe or Bisnode. The differences between these are small, but if you have many inquiries, it may be good to avoid lenders using UC for your loan application. Here you can find lenders who have loans without UC. UC records all credit information on you, while most other information companies only register their own.
Your credit rating affects many financial issues, including these:
- How much you can borrow and what the interest rate will be.
- Your opportunities to subscribe.
- Your opportunities to take out insurance.
- If you are allowed to buy a car on installment.
- Credit card applications.
- If you want to rent a home.
As you can see, your credit rating has a big impact on many important issues in your life.
What affects your credit rating?
To understand how you can improve your credit rating, you first need to know what is affecting it. A lender can see your credit rating through a credit report. A credit report gives a fairly clear picture of your finances. Of course, other factors that are not visible can tip the scales.
Some of the things that affect your credit rating are:
- Income and expenditure
- payment Notes
- debt Aldo
- Other credit requests
- Ownership of housing
These factors are analyzed and finally give you a credit rating that looks something like the following:
- High credit ratings greatly enhance your chances of getting a good loan, obviously within the framework of what you can manage.
- Medium creditworthiness still gives you opportunities for eg. Blank loan or maybe purchase of a mobile home on installment. The amounts become smaller and the interest rate increases.
- Low credit gives you poor opportunities and the risk is that you will be denied the loan completely. Here there may be opportunities for SMS loans or to subscribe to a mobile subscription.
Note that these three grades are only excerpts, normally the grades are divided into even more classes.
Improve your credit rating
Below are our best tricks to strengthen your credit rating both now and in the future!
- Order a credit report on yourself. It is partly to give yourself an overview, but also to see that everything is correct. Sometimes the system can go wrong and must be corrected.
- Pay off or collect your loans and credits. Everything to bring down your total debt and interest expense. Focus more on the amount of loans than on the amount. Many small loans tend to be expensive and take up more space than they deserve.
- Terminate credits you do not use. Through your credit report you can easily see if there are credits on you that you do not use.
- Avoid unnecessary loan applications. A lot of applications here and where give a lot of unnecessary requests. It may not look like you need to borrow constantly.
- Make a complete plan for your finances. Check your income and expenses, then make changes that also work in the long run.
- Avoid payment remarks at all costs. If you already have payment remarks, then you can focus instead on the other points. Make sure to always pay the bills on time, or negotiate for more time. Payment notes remain in the register for three years.
- Debt balance needs to be resolved first. If you have a debt balance, it needs to be removed first, otherwise it will be almost impossible to get a loan granted.
- Loan brokers or co-applicants. The first one may not affect your credit rating, but it can affect the result. A co-applicant can have a positive impact on your ability to pay.
- Finally. Increase your taxable income. Pay negotiations, change jobs or show your front foot more so that your salary increases along with your opportunities.
If you have done the above and still have a little tight finances, there are loans where you can choose 1 or 2 free months per year.