It is crucial to review the financial aspect of a secured loan, or any loan for that matter, before you take one. Many borrowers focus solely on the monthly payments, but they often forget to consider how the loan could affect their overall debt amount and its impact on their budget and saving capacity. If you see yourself struggling to make ends meet and always resort to borrowing, perhaps it’s time to take a look at your spending and see where you can cut back in order to get out of debt quickly.
Nowadays, credit scoring is more than just being able to get credit cards, loans, and mortgages. It can also affect many financial aspects of your life including getting a mobile contract, insurances, rent, and much more. Unfortunately, the world of credit scoring is filled with misunderstanding, mainly because the lenders themselves do not want it to be understood. Here, we are going to debunk the most common credit myths.
At least in the UK, there’s no such thing as being blacklisted. Just because one lender has rejected you doesn’t mean that others will, because each lender scores you differently. However, after every rejection, it is important that you check your credit report to analyse what went wrong.
Of course, having bad credit could make it seem that you’re blacklisted, because most of the time, lenders will not lend to those with a history of defaults. Although there are some who specialise on lending to borrowers with poor credit history. Be ready though, because they charge much more.
Some people think it’s safe to avoid credit at all costs, but while bad credit can hurt you, so does having little to no credit at all. If you have very limited information on you, it would be hard for lenders to predict if you’re going to pay your dues on time.
Many people presume that having a perfect credit score is the key to guaranteed approval. Wrong! While you may be rejected for having bad credit, so does having a stellar one. If credit card companies see that you always make your payments in full, you can get denied as well. They make the most money from customers who never default, but rather pay the minimum only, month after month.
Most people mistakenly believe that everything about them is revealed in their credit file. The truth is, only their financial data can be accessed through their credit report. Here are a few things which are not present in your credit file, although you might believe otherwise:
While many borrowers only think of their credit score as a means to gauge whether they’ll get approved for a loan or not, the truth is, your credit score also dictates the rate that you’re going to get, should you get approved. For example, if a certain provider promotes a 5% representative APR, you might qualify for a loan but be offered a 30% APR if you have less than perfect credit.
Same goes with credit card companies. If the company promises 0% interest, you might be given a shorter 0% period if your credit fails to impress.