Understanding credit report or credit history

Read on and understand what credit report is and how it can affect you.

14:15 24 April 2013

Credit report is very important for a lot of people especially to those who are thinking about taking out a loan or credit. This is because it’s one of the things that lenders seriously consider before they approve or reject your loan.

Contrary to popular belief, credit reports do not have a single number to categorize borrowers. They do not use “A” for example, for people with great credit history.

What these reports contain is information about your past financial behaviour.

Lenders will see the following information: the amount you currently owe to different lenders, details of your savings account, whether you missed payments on existing and past accounts, whether your house has been repossessed, whether you filed for bankruptcy, etc.

Lenders use the information mentioned above to figure out if they’re going to approve or reject your loan. Of course, if you have great credit history, your loan is more likely to be approved. Not only that, you’ll also most likely to get the lowest interest rate.

People with poor credit rating can still apply for loan. Although your chances are not huge, a lot of lenders will take the risk to lend you the money but they are most likely to charge you with higher interest rate.