Importance of a Good Credit History
The world today is very fast and all of us spend in present based on what we would earn in future. Whether it is a new car that you desire, a dream home that you long for or a business venture that you feel has great potential for income generation. All of this can be purchased based on your projected future income. With financial tools like credit cards available with the majority of the public, the urge to spend for the momentary pleasure becomes unavoidable. All this ties in to your credit history.
What a Good Credit History Means
Let’s first understand the basic rules of availing loan from a lender’s perspective. The first thing that any lender looks into before lending is the integrity of the applicant. Irrespective of how rich you are, how promising the project is or how valuable the asset is if you have a history of credit defaults your application may not sail through and this becomes even more important with unsecured loans like credit cards or even secured loans like car loans which are more of a luxury goods than necessity and people tend to be casual with them.
One thing we should all remember that any failed EMI (Equated Monthly Installment) of a loan, missed due date of credit card payment or a balance transfer on a credit card hits your score in reports generated by Credit Information Companies (CIC’s) like Experience, Equifax, Highmark and others which forms the entry barrier for consideration by any financial institution.
Why a Good Credit History Matters
In today’s world of social media, online access of virtually everything records every transaction whether monetary or non-monetary. For example, your first credit card while you were in school. Perhaps you used it for some purchases and then forgot to follow up for doing the payments. This way, it records the credit history. When we open a bank account or apply for a loan or a credit card we submit proofs. The proof includes our NRIC number, income tax registration number, passport number, mobile number, permanent address etc.
Whenever an applicant avails a loan the conduct of the loan on a monthly basis by default is shared with the CIC’s mentioned above. This detail is provided to any bank who pulls your report based on the identity or address proofs submitted earlier. This thereby provides banks access to your repayment history. These CIC’s use a complex algorithm to provide scoring based on number of factors. Available credit, amount of unsecured and secured loans where secured loans increase your score and unsecured loans decrease your score. Other factors include irregularity in loan repayments, written off loans and others.
Maintaining a Good Credit History
Another important factor with regards to your credit report is that it takes a only few defaults to reduce your score to unacceptable levels. Whereas it takes years of prompt repayment to build a respectable credit history. Therefore it is imperative that any loan that we take whether, secured or unsecured, we should make timely repayments. This helps in maintaining a healthy credit history. Any loans that we would require in the future would depend on how we deal with our financial liabilities today.
If you find yourself having any queries regarding how to maintain a good credit history, you may approach our team of experienced staff at the best licensed moneylender. We have the expertise to advice you on credit history matters, so do hesitate and contact us now.