Assumptions that can Harm your Credit Score
Your credit report directly affects your chances of getting your loan application approved or not. The loan lenders check your past credit history to see how good and disciplined you are at repaying the borrowed money. Generally for the loan application to get approved the credit score should be between 750 and 900. This is called a healthy credit score.
But if your credit score is below the good score, the chances of your loan application getting approved are doubtful. Though there are ways with which one can improve their credit score. It takes some time, and one needs a lot of patience.
Though there are some assumptions that one makes that can hurt your chances of getting the loan approved.
- Settling the loan is good:
False. There’s a difference between settling your loan or paid- off the loan. A paid- off loan is when you pay the entire borrowed amount to the bank on the line of the agreed terms and conditions. On the other hand, the settled loan is when you pay off the disputed amount. When you settle a loan, it reflects in your credit history, and the banks will know.
- No credit history is good:
False. To give you a loan, banks want to know how good is your repaying ability and habit. Having no credit score makes the banks doubts even more about your financial habit. An applicant with no credit history is a risky investment for them, and there are good chances they will reject your loan application if you do not have any credit history.
- Paying your loan amount quickly:
If you are applying for a new loan but it is not getting approved because of your existing loan. In such a case, the borrowers try to pay off their existing loan quickly in hopes the new loan will get approved soon. But this is not the way to approach the loan repayment. It takes sixty days for your credit report to get updated and your rushed repayment to show on it. So even if you have paid off your loan, it will not show for the next two months which means you will have to wait for another two months to apply for a new loan.
Fore you apply for a loan; it is better to ask for the copy of your credit report to know where you stand and what your chances of getting the loan are. You can apply for the credit report once a year for free of cost. If your credit score is not good, then the report will help you calculate how much time it will take before you can apply for the loan.
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