First, how is a good credit score determined?
Credits are normally given a score between 300 and 900. Although there might be a little variation in this score from bank to bank. But when your credit score is below 700, you are deemed to have a bad credit score. Hence, you can’t access high loan amounts and even the small one that will be approved for you will come at a high interest.
If I had to narrow it down, here are the top 5 factors that can affect your credit score;
- New credit. When you take out credits within a very short period, your credit risk is increased
- Credit mix. Since you have access to various types of loans, a debt is needed to determine your score.
- Age of your credit history. If you have a lengthy credit history, you will have a high credit score
- Your debt. If for many consecutive months, your debts are very high or you constantly max out your credit cards with various fees, your credit score will be negatively affected.
- History of payment. If you are servicing any loan, you need to consistent with paying your loans. Otherwise, it will have a negative impact on your credit score.
How you can determine your credit score
Either of the major credit bureaus can give you your credit score free of charge. These major credit bureaus are CRIF high mark, Experian, Equifax and CIBIL.
However, keep in mind that according to RBI regulations, you can only have access to one free credit report per year. If you can’t access your credit score through any of these options, another alternative is through creditmantri.com. See more.
The relationship between your loan application your credit score
Regardless of the friendly nature of any bank officials, they are not father Christmas. They prefer reliable borrowers – those who are consistent with paying back their loan on a monthly basis. Hence, before they can approve your loan, the first step they will take is to check your credit report and most importantly, your credit score.
When they check your credit report, they will be seeking to answer the following questions;
- The number of loans you have previously taken
- Were you able to completely repay your loan amount before the due date?
- How many times did you miss your payments?
- Are the remarks in your report good or bad?
- How many other active credit accounts do you have?
The answer to the above questions will help banks to make a decision on how reliable you are and whether or not you will repay your loan.
Other factors that can affect your loan application apart from your credit score are;
- History of your business
- The transaction sales in your business
- The amount of revenue you generate
- Your profit after tax
- Whether your business is public limited, private limited, partnership or a sole proprietorship
How you can improve your credit score or if you have a good one, how you can maintain it
It is impossible for you to improve your credit score overnight. The first step is to ensure that your debt is paid in time. Also, close any overdue payments as early as possible. After closing or paying all your overdue, keep paying your dues in time. Gradually, your credit score will start improving. To find out more, check out https://www.aspirebusinessloans.co.uk/Unsecured