There is a huge possibility that at one point in your life you may need to use credit. These credits are usually for buying homes, cars, and so on. Also, you will need credit to divide a bigger purchase into smaller payments. Credit history is usually recorded in your credit report. This includes your past borrowing behavior. Check out why you should have a good credit score.
1. Your credit acceptance chances increases
Could you give someone $2,000 without knowing them? Even when they promise to pay back and urge you to trust them? This will be a no for the majority. It’s almost impossible to trust a stranger with huge sums of money with all the risks involved. That’s why credit scoring majors on limiting any risks associated with lending cash. Most lenders will need some form of evidence to assure them you will pay what you owe. For more info, they will gather your details to find out how trustworthy you are. Some of the information they look for include:
● Your application details based on what you provided
● How you have been relating to them in the past
● Your credit report’s current financial situation as well as your credit history
Convincing the lenders to trust you with their money without a credit history as a backup is impossible. They can’t be sure whether you will pay or not. This is why most loan applications go down.
2. Better credit history equals best credit deals
When your credit history is good, you will have higher chances of getting the credit. Sometimes your application may be accepted but a limited credit history can spoil everything. This may include; your interest rate and your credit card limit among others. Your credit history will tell whether you will pay your debts on time. The risk of not paying debts on time could be offset with a higher interest rate. The higher the interest rate, the less likely you will be considered for specific products and offers. In short, borrowing becomes expensive when you lack a credit history.
3. It touches more than just credit applications
The absence of credit history will greatly affect you despite not having a credit card, personal loan, and mortgage. For example, you will be affected in the following ways:
About 48% of private UK landlords will carry out credit checks on soon-to-be tenants from recent research. And 95 % of landlords in London say they must do the checks. Mostly, they will search your file for any defaults, CCJs or bankruptcies before you rent.
Receiving a mobile phone agreement
Phone contracts are also loan types. You will pay in installments after you get the phone. Your credit score will determine if the network providers will trust you with their phones. Also, paying for insurance, getting a job, and so on, will depend on your credit history. If you lack one, your chances will be limited.
The whole process of credit scoring is about risk. Good credit history will assure lenders that they can trust you. If you don’t have one, your credit application will be turned down. You need to get more info on your credit history, or how to start building one before you can be sure of getting a loan. Not having a credit history can affect your overall life. This is because most companies must carry out credit checks before offering loans.