Although you may not have any debt, it may cause more problems than having a bad credit score
While some people are burdened with student loans and credit card debt, there are a few of us who don’t have any loans, debt, or credit card balances, believing that it is the best way to stay out of financial trouble.
However, when these people need to finance a major purchase, or prove that they can pay a monthly bill, they are rejected more often than those with a bad credit score.
Why no credit hinders
Although there may not be any debt to your name, when you need to buy a car, or sign a lease on an apartment, the bank or lender will look into your credit score to determine if they will approve your loan. If you have no credit score, the lender has no history to analyze and cannot determine whether you are worthy of borrowing money. This will often lead the lender to decline your application.
Bad credit does give the lender history to evaluate. This shows if the borrower is too much of a liability to approve the application, or if the candidate will be approved but just receive a higher interest rate.
Start building good credit history
It’s a good idea to start building a good credit score before you need it! You can start this process by taking out a credit card at your bank. This can tie neatly into your checking account so that you can manage all of your money in one place. By using your credit card consistently over time, and paying off your balances, your credit score will begin to grow.
Improve a bad credit score
To turn bad credit into good credit, you must start by repairing the damage. You should make all loan and credit card payments on time and in full. Avoid building up more debt in order to keep a low debt-to-credit ratio, and do not close old accounts. The longer that you have established lines of credit, the better for your overall score.
While turning a bad credit score into a good score can take some time, it will ultimately be worth it as you will be able to secure a loan at the best interest rate available.
To suit your needs and situations, visit Ranch & Coast Mortgage Group Inc. to secure your mortgage loan today!
