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How to Build a Healthy Credit Score
When choosing a loan, one of the first things we check on is the interest rates. Apparently, the lowest interest rates and the best deals are only offered to those with good to excellent credit. If you have plans on obtaining a personal loan, car loan or mortgage, check your credit first to see if youll qualify for the best rates. If you have a low credit score, its a good idea to work on improving your credit first before applying for a loan. How can you build up your credit score? Here are some tips:
Remove negative information. Negative information can dramatically pull down your overall credit score. If those negative remarks are old and have already been settled, ask the credit bureau who issued your report if these remarks can be removed. Also, check for errors or incorrect charges in your report. If you found errors, call your creditor involved to clarify the issue and send a letter of dispute to your credit bureau.
Do not maximize your credit limit. See to it that youre not using more than 50% of your credit limit on all your accounts. Experts recommend using only 30%-40% of your allotted credit to reduce the risk of accumulating debts and improve your credit score at the same time. Dont close old accounts. Be careful about cancelling credit cards especially if youve had those cards for a long time. If those cards have high rates and charges, you dont have to use them often. Use them once in awhile only for small purchases to keep them from automatically closing. After swiping the card, pay off your balance completely before your scheduled due date.
Submit payments on time. Its important to submit your payments on time not only to your credit cards but to all your creditors. Pay close attention to your payment dates. As much as possible, try to submit your payments ahead of your due date to avoid delays or missed payments. Not only will this habit help build up your credit score, you can also save money by not paying the extra interest rate and late penalty charges.
Avoid submitting multiple applications to different lending companies. If you want to apply for a new credit card, choose carefully and submit your application to only one credit card company. Dont try to apply for credit cards just to get the freebies they offer. Remember, too many inquiries on your credit report sends out a negative impression to other lenders and may pull down your credit score.
Call in advance if youre going to be late. If you know that you cant submit your payment on time for this month, call your lender or credit card company right away and explain your situation. If you do so, it is most likely that your creditor would extend your due date without reporting it as late payment. If you promised your creditor that you will be paying your balance by the next month, do your best to keep your promise.
Possible Reasons behind loan rejection!
Loans are the useful fund and become valuable at the dearth financial situation when you need to finance your business or personal needs. You might be alert of several possible reasons a bank may reject your loan application. Applying for a loan involves preparation on different fronts. You are required to update your credit score such as ensuring close-out existing loans or credible loan track, proper payment of credit cards, proper tracking of other existing loans on property or assets, good income tax report and sound salary figure with healthy bank statement. These are the basics and prerequisites of the loan preparation as well as approval.
However, there are several other bold factors that can lead to your loan application rejection!
The first and foremost reason is your inconsistency in a particular job. This is the prime reason behind loan denial by banks. If you are not consistent in a job for more than six months then many banks consider your case as a weak loan application. Now days it is a common practice to switch jobs from one organization to other to gain a salary hike or get rid of job pressure or for a change. Banks pay considerable attention on job stability. So better to stick with a good organization as it hampers your credit worthiness and also you can avail prepayments by your employer at critical times.
Your profile is negative or not in line with the internal policies of bank may be the next reason. Every bank has its own internal policies and guidelines and they define credit profiles or geographical regions according to their policies as negative for loan. If you fall under this radar then the banking institutions will not lend you loan. Though there is an escaping space as your profile considered as negative by one bank may not be negative for rest banks. Also, one can present additional documents as security such as fixed deposits, insurance policies or other securities.
Apart from these, rest reasons are falling of your residential address in the banks defaulter zone, loan application for an old or disputed property or your loan application has been rejected before. But you can avail loan even if you are under these loan rejection radars by providing valid and convincing proofs against those reasons to the bank. It is better to approach a bank, for loan purpose, which is near your residence or the bank where your salary is deposited. Banks are ready to address your valid reason for loan application and latterly awarding you with loan approval.