Everybody has a certain dream house or car, but to gain access to that house or car our pockets bear the loss. To mitigate this loss, we realy on and apply for credit with our bank, Credit Union or other lenders such as Smart Loans. Credit acts as a bridge to items we require now but can’t afford to pay for now. Many people are unaware of the importance and implications of our Credit Profile – History when we apply for a loan or mortgage.
Before we acknowledge the implications, we need to consider the importance of one’s Credit Profile – History.
One’s Credit Profile – History reflects various factors, the main factor being one’s previous repayment history. One’s previous repayment history, as record on your Credit Profile, is the most critical element while applying for a loan. Approval of a loan depends on trust and this trust is underpinned through one’s repayment history. Banks or lenders go through your credit profile history to determine whether you have the ability and track record to repay loans on time.
Credit profile history composes the credit repayment record of an individual and this credit repayment record is a fundamental reason for approval or dismissal of your loan application. A bank or lender will actively check one’s credit profile as it profiles the risks associated with your financial stability and track record. Credit profile history acts as a filter and segregates potential red flags-risks such as:
- late repayment of installments,
- account being sent to the collection department,
- bankruptcies,
- lawsuits,
- wage garnishment, judgments or attachments,
- liens,
- charge–offs,
- personal insolvency -settlement.
Along with credit profile history, the length of your credit history is also of utmost value. The length of one’s credit history records the time span since you first started using credit. Another important factor affecting one’s credit profile history is the types of credit used and how recently such credit was obtained and repaid.
The approval of a mortgage or loan application is dependent on your credit profile history. For example, if a person is a defaulter or has missed credit repayments in the past, such missed payments will be recorded on one’s credit profile history and will adversely affect your chances of being approved for your next credit application. Or having an impaired credit profile history may result in you being charged a higher interest rate compared to others to reflect the higher risk you represent.
A negative loan repayment history leaves a major red flag on credit profile history.
In addition, when you apply for a loan, the banks/lenders check the total level of credit and one’s existing monthly repayments. This is an integral part to determine how much of a mortgage or loan a person can afford. Every detailed information regarding one’s financial stability and the ability to repay is categorized through credit profile history. To conclude, a good credit profile history is an asset and needs to be protected and maintained. Your credit profile history provides banks/lenders with the best indication of your ability and wiliness to repay any future credit granted.
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