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When you apply for a home or personal loan, the first thing your bank will do is check your credit score. Credit score or credit history is basically the result obtained from the analysis of credit files of an individual. Besides banks, insurance companies, phone companies and government institutions also use credit scoring to evaluate an individual’s financial standing.
Why is credit rating important?
When you fill out your application for a loan, the bank has no concrete means of evaluating you in terms of your ability to repay the loan on time. So they use the credit rating as a tool to determine how financially strong you are. For this, they do a complete analysis of your income, ongoing mortgage, assets and take into account several other factors to assess you. This will provide a clear picture of your monetary status to the banks and other money lenders. When you try to borrow money with bad credit, there are high chances that your application may get rejected.
due to bad credit history
A person’s credit score can get damaged due to many reasons. When you repeatedly default on your mortgage payments, it can lead to a bad rating. Laziness in paying bills, poor financial condition and excessive spending are some of the major reasons for bad credit. Different countries have different methods of assessing a person’s creditworthiness. A bank may reject the application of a person requesting to borrow money with a bad score. This is done as per the policies of the bank in an effort to protect themselves from those whose credit scores do not meet the prescribed standards. To improve your credit score, you can talk to a consolidation firm for easier repayment options.
home loan with bad credit
Having bad credit does not make you completely ineligible for availing a home loan. You can still borrow money with a bad score with the help of consolidation firms. If you want to make a deal for the house of your choice, you need not worry about the bank rejecting your application for the loan. A consolidation firm will analyze your financial records and provide you the loan on certain terms and conditions. Usually a person applying for a loan has to pay a slightly higher rate of interest than someone with a good credit rating. But when you make your payments regularly, your chances of improving your credit score increase. You can still borrow money with bad credit if you own a property, because your property will be used as collateral, not your credit score. This is called secured loan. If you do not have any assets, you can still qualify for an unsecured loan subject to specific conditions.
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