Credit history plays an important role in the life of a modern person. We can say that it is your financial reputation that influences the decisions of banks to issue loans.
It is difficult (or even impossible) to get a loan with a bad credit history. Today, we describe what credit history is and how to improve it.
What is credit history?
Credit history is a set of comprehensive information about the borrower and his/her obligations (including those paid). All information in the credit history is saved and provided to banks and lending institutions so that they have the opportunity to assess the risks and make a decision on providing a client with a new loan.
The presence of overdue debts in other banks unambiguously guarantees the refusal of any bank to finance such a client.
In addition, banks are looking at whether a person has a permanent income. Permanent income refers to formal employment with a company for more than six months. The family status of the person, the presence of property and the income of the spouses are also taken into account.
The presence of litigation, tax debts is another additional factor that banks evaluate when making decisions.
Experience with the bank (the availability of accounts and cards, transactions, the stability of the client's income, non-cash payments, their regularity and volumes) allows the bank to better understand the client and offer him/her the best lending conditions.
How to check your credit report
In the U.S, there are several different credit bureaus, but only three that are of major national significance:
Equifax;
Experian;
TransUnion.
Once a year, you can get a free statement of your credit history from each of the three nationwide credit reporting companies. You can order it online from annualcreditreport.com, the only authorized website for free credit reports, or call 1-877-322-8228.
How to improve your credit history
It is impossible to delete your credit history but it can be improved in legal ways. We offer 3 ways to repair your credit:
Supplement history with new information. You can fix your credit history by taking out short-term payday loans. Timely repayment of several payday loans will surely increase your credit. However, missing repayments or making multiple applications can damage your credit score. Learn how payday loans affect your credit in advance: https://www.first-federal.com/do-payday-loans-affect-my-credit-history;
Correct mistakes. If you did not allow delays and repaid your loans responsibly but your credit score still worsened, an error has probably occurred. You should contact the bank or the credit bureau and submit an application to challenge your credit history: organizations will check and delete erroneous data, which will automatically improve your credit history;
Pay off current debts. Often you are declined for a loan because you already have several loans. In this case, in order to get a new loan, you will first need to repay the existing debts. This applies not only to bank delinquencies: unpaid fines, alimony and utility bills are also displayed in the credit history. They will also need to be paid off.
3 reasons your credit score is lower than expected
You paid off your loans on time but your credit history turned out to be worse than you expected for no apparent reason... Why might this happen?
Once you were a guarantor but forgot about it or simply did not check if the loan was closed;
Human factor: an error or a typo has crept into the data, the bank did not send the information on closing the loan to the credit bureau in time, or the credit bureau did not reflect the information in the report;
You no longer use a credit card, you returned everything on time but did not take into account the payment of the commission for using the card or SMS-informing. Such inattention can spoil your credit history.
How to improve your credit history after bankruptcy
Despite the growing popularity of bankruptcy procedures, it is by no means a panacea and entails a number of limitations. In particular, a person found to be financially insolvent is required to notify financial institutions of this within five years. In addition, bankruptcy is a serious blow to credit history, and often people are faced with constant loan refusals. After bankruptcy, it is recommended to refrain from contacting banks for a certain period (at least 12 months), and then try to prove the restoration of solvency. This can be done using an income statement or a deposit taken. Also, some banks offer special lending programs for increasing your credit score. Try to use them.
What else can help
Sometimes banks decline you for a loan if you have too many loan applications. Potential lenders may check this when you apply for a loan, so this may indicate frequent attempts to get a loan product. Arrange a period of "credit silence": do not contact banks and do not check the credit history for a while;
If you need a loan urgently and it is not possible to correct the situation in a short time, you can enlist the help of another person - a guarantor with a good credit history;
If you suddenly find out that a loan has been taken in your name without your knowledge, be sure to notify the bank and contact the police.
The best way to fix your credit history is to take responsibility for your obligations. We recommend repaying delays and servicing obligations in a timely manner: banks and collection agencies are ready to meet the client halfway if he or she really wants to improve the situation.