Assumptions that can Badly Affect Your Credit Score

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Posted In LEGAL GUIDANCE
Assumptions that can Badly Affect Your Credit Score

We all want a good credit score not just for the current loan but also for any loan that we might need in future. A good credit score promises a quick approval of the loan. But if your credit score is suffering, then taking few steps can severely backfire. Sometimes people take certain steps to improve their credit score. This only adversely affects your chances of getting your loan approved.

Lets for an instance say that you did some transactions using your credit card, but later you get into some disagreement with your bank over the dues. And it went for a couple of years. Before taking a loan for your home, you decide to settle down with the bank over the credit card due to some amount. You might think that this step has helped you in improving your credit score but it hasn’t in reality.

Paying off small loans before taking a bigger one shows your financial discipline. Do not get confused between paying off the loan and settling to an agreed amount with the bank. Both of these reflect your credit score differently.
The banks decide whether to give you a loan or not through the credit score. If your credit score shows any kind of difference or irregularities, then they might hesitate in approving a loan.
 
Is not having a credit history, a good thing?
Most common perception is that if you don’t have any credit score then it will up your chances to get the loan approved. Well, this is not true. If you have never taken any loan either a big or small one, it is a cause of worry for the bank. Banks need some basis to figure out if giving you a loan beneficial to them or not. Credit score gives them an insight of your financial and spending habits. It also gives them an idea whether you will be able to pay back the loan.
 
Is rushing a good idea?

Paying off your previous loans is a good idea. But you need to remember that the credit scores are reflected after 60 days. So you need to give it few days before you take another loan for it to reflect on your credit score. To get your home loan approved, you will have to check your credit score and pay off any outstanding loan for the same.
 

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