25 Mar How Loans Affect Your Credit Score
In a perfect world, we wouldn’t need to borrow money from lenders, including cases of mortgages, buying a car or funding our studies. However, it’s not widely possible to buy a house with cash, so most of us seek for a financial help at some point in our life. Credit scores are highly affected from loans, in both negative and positive ways. Baby Boomers Financial created a list with ways that applying, ore re-paying loans, can impact your credit rating. Check them out.
How Loans Affect Your Credit Score
Your credit score is what is going to determine whether you’re qualified for a , or not. However, there are factors of the whole process, that can lower, or alternatively increase, your credit rating. See who these factors are:
Loan Applications Can Lower Your Credit Score
Even though you need to show good credit rating for your application to get accepted, only by trying to get a loan, you might lose few points. The reason behind it is that 10% of your overall score, is made-up from your new credit activities. Read our relevant blog post, about what makes up your credit score: “What Makes Up A Good Credit Score.”
What About the Balance of Your Loan?
After taking out the loan, it will be listed on your credit report, and therefore, it will show that you have a debt. High balance can steal few extra points from your score, but as you’re paying down your loan installments, your credit score will raise again.
On Time Payments Will Give You Extra Points
No one said that loans can only harm your credit rating. On the contrary, they can give it a boost, in their own way. See, when you withdraw a loan, then you are obliged to make monthly installments, to repay your lender. If you’re paying on time, very time, that shows a consistent payment pattern. In other words, it shows that you are qualified and responsible enough, to handle your financial and pay back your debts. Read everything you need to know about late payments here: “Late Payments: Questions & Answers.”
Loans, their applications, as well their monthly installments, are all part of your credit history. And credit history, is the primary purpose of having a credit score. Therefore, any changes related to them, may affect your score by lowering it, or increasing it. If there are negative items in your report, originating from loans or other sources, we can do that for you. We can help you to achieve your financial freedom, and effectively remove or correct credit errors or negative items. Baby Boomers Financial is a reputable credit repair company, based in San Diego. Apply for your free credit review here, or contacts us for more information.