Making all the correct decisions, such as timely loan repayments, does not ensure a high credit score. How does it feel when you apply for an online loan and the lender responds with a higher interest rate or tells you to inquire again later? However, this article will put you through 4 items on a credit report that could discourage lenders.
Please keep in mind that it’s not just late or missed payments that lower your credit score or cause lenders to be wary of you. If you’re asking for a personal loan, lenders will look at other aspects of your credit report.
However, new applicants aren’t the only ones who are scrutinized. Lenders analyze their present clients regularly to determine the risk level of the borrower to the business.
See Also: Credit Notes In Ghana.
The top 4 credit items that could discourage lenders
The top four credit items that make lenders feel insecure about how to prevent them are listed here.
In a particular period, there are too many loan applications.
1. Applying for loan from various lenders at a time
Opening a new loan account with your bank or getting a revolving credit facility is not an issue. However, requesting for loans from three to four different online lending apps or banks in a short time to keep out of debt could be a sign of desperation. Also, opening two or three new credit accounts could signal to lenders that you’re having financial difficulties.
At the very least, the next time you ask your bank for something, you’ll be catching attention.
2. Being a guarantor
When you co-sign a loan as a guarantor or in any other capacity, your credit report will reflect the total obligation. You are the owner of the loan until they entirely pay it off, according to lenders. When you request for credit, they will count it as one of your debts.
So, before you co-sign a loan for a friend or family member, explain what it means to make such commitments to a loan obligation that is not yours. If you are planning to take out a loan soon, avoid co-signing as a guarantee on someone else’s loan.
3. History of partial repayments
While making partial repayments is beneficial to avoid loan defaults, it has a negative impact on your credit score. Lenders that recognize your pattern of making incomplete monthly payments will be hesitant to extend your credit.
Making partial payments isn’t always indicative of a problem. For example, after the holidays, you are making partial payments in January. However, paying only a portion of the balance each month shows you cannot pay off the balance.
4. Lots of hard credit enquiries
The lender will seek a credit report on you every time you apply for a loan. Credit report inquiries have different effects depending on the borrower, credit score, and the amount of confirmed inquiries. Many people are unaware that having too many inquiries on your credit report might have a negative impact on your credit score. Even when you request a “buy now, pay later” on a telephone, they can make inquiries on your credit record. As a result, make sure they’re only carried out when really necessary.
Conclusion
It is critical to know that credit reports contain major red flags such as bankruptcy, foreclosure, and late or missed payments. However, those aren’t the only financial mistakes that cause banks to be wary of a potential customer. Therefore, in all you do as borrower, always remember these 4 items on a credit report that discourage lenders.
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How to improve your credit score in Ghana
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