Your credit rating is something that everyone should be aware of and have a good handle on. Most people know that it’s key to improve your chances of getting a credit card or loan, but it will also affect what interest rates you’ll get, car payments, and mobile phone contracts.
If you want to use a virtual terminal with your credit card, then understanding your chances of applying for one will make all the difference. Check out my Credit Score Tips And Myths below, to help you get started!
Credit Score Tips And Myths To Understand And Increase It
What’s my credit rating?
Your credit rating is a generic score given to you that rates how risky you are to lend to. This will start at zero if you haven’t borrowed it before. As you start to make payments for smaller items like mobile phone bills and car insurance, your credit rating will begin to increase.
Getting credit cards and smaller loans and paying them back effectively will also work to increase your rating, giving you access to more credit options and better rates. If you fail to make payments, this will reduce your credit rating and will have the inverse effect.
You’ll find that your options for lending are reduced, and you may no longer be able to apply for credit cards, and those that you can get will generally have very high-interest rates because of the risk factor associated with you.
All lenders will score you differently.
In the UK, there’s no one standard credit rating, and each lender will score you slightly differently based on their own perceptions of risk. There’s also no official blacklist in the UK, meaning that if you get rejected by one lender, it doesn’t necessarily mean that another lender won’t offer you a loan or other credit options.
This can be difficult for capitol students to acquire a loan for their home. If you do have poor credit, though, you may find it challenging to find a lender that will offer you anything, and you’ll most likely find that any that will offer you credit will have very high interest and fees.
Lenders also use slightly different methods to assess you. You have a credit file that will be checked any time that you apply for credit, but each lender may look at different information, including how often you’ve applied for credit in the last few months and any past history you have with that particular company.
Are you profitable for the lender?
A big part of what lenders look for when they are deciding if they want to lend to you or not is if you’ll make them money. This is an interesting change of mindset, and it’s important to understand that lenders often don’t have your needs at heart, but their own profitability.
We all understand that lenders make their money on interest and fees for not paying on time. This gives two key options for them – low-risk borrowers that will lend over long periods of time, and then high-risk borrowers that will have higher interest rates but may not be able to make the payments. This is why some people with outstanding credit scores may find that they get rejected when applying for a loan.