A Credit rating assesses the merit of your loan application i.e. the worthiness of giving you a loan. A Credit rating check is carried out by the credit bureau and is used to check the applications by individuals, businesses and even country. It is calculated by viewing the applicants financial history, assets and current liabilities, this then gives them an indication of the risk involved lending to the applicant.
What are the factors that affect a personal loan application?
The individual score of a credit report determines the credit worthiness of the applicant. Taking into account the aforementioned aspects it then tallies them up to see what the risk is of loaning to the individual. It takes into accounts previous spending patterns, current debts, amount of credit used in the past (sometimes having had no credit can be a disadvantage), saving patterns, assets such as house, vehicles etc. This then determines the ability to meet with the loan repayments.
What is a credit report?
This is your credit history, it is based on individuals previous borrowing and spending. When applying for any form of credit or registering for a new bank, a credit check will be carried out through the credit bureau, this helps lenders (in most cases banks and building societies) determine whether or not the applicant is going to be high risk, this will be based on the credit score they receive from their check carried out by the bureau.
How can I improve my credit rating?
The simple answer is keep up with any credit card or loan repayments! However there are other ways to improve your rating, for example having no previous credit history can have a negative effect so many people take out store cards in order to bank some credit history. Making a small purchase and then repaying it straight away will have a positive effect on your rating. It is important to make sure your finances are kept in order as you never know when a credit rating may be carried out, such as renting property many letting agencies will carry out a credit check in order to determine suitability of the tenants.
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