Credit rating and its effect on your borrowing

How credit rating affects borrowing of money

08:10 16 October 2014

Your credit rating can be affected if you do not keep up your repayments on your loans. This is because your credit history is always recorded and thus anytime you miss a payment, it will be tracked, giving you a bad credit. No lender could ever give a loan to a person who does not make repayments. This could expose your future capacity to borrow money, even if your financial security at that particular time is guaranteed. Being financially linked to persons with bad credit rating could have an effect on your individual rating too.

 

When turned down by a lender, try another lender, since different lenders apply credit ratings in a different way, however, keep in mind that numerous credit checks within a short period of time also affects your score negatively, and reduces your chances of being considered by a different lender.

 

Checking your credit rating

 

You can check your credit rating with the Credit Reference Agencies. Lenders, who are their customers, require information that is as precise as possible for deciding whether to grant loan or not.  Credit Reference Agencies have no control over your eligibility to borrow money. If you want to correct information in your credit report, get in touch with the agency and let them know what is wrong. Furnish them with necessary information to get it changed.

 

Considerations

 

Carefully work out how much your needs necessitate you to borrow and the means by which you shall pay it back. Never fall into the temptation of rounding up your income.

 

• Choose higher regular payments over low ones, and shorter loan duration. This minimises the total amount you are required to repay, over the loan life.

 

• Missing a payment jeopardises your credit rating in future, thus ensure you can comfortably afford loan repayments regularly with some cash to spare.

 

• Speak to your lender in good time, should you have trouble making a repayment or at the foresight of an oncoming future trouble in making repayments.