We all live in a world that is based upon credit, with our homes, cars and even furniture, all paid for in monthly installments. One important aspect of our lives is our credit history, and from the very first time you take out a hire purchase agreement, records are kept, meaning that every adult citizen would have a credit score. Banks and other lending institutions can access a person’s credit score, and this is just one of several criteria that a lender takes into account when a person makes a loan application.
In Australia, for example, there are a total of four credit reporting agencies that collate and store data about the financial transactions a person has undertaken, and whenever a person applies for any kind of loan, the lender will request the applicant’s credit score from one of the registered credit reporting agencies. The score will be a number, and the higher your credit score, the less of a risk you are according to the lender, therefore, the higher your score, the less likely you are to have a loan application rejected.
The data that is used to calculate a person’s credit score would include the following:
- Type and amount of credit applied for in the past.
- Court writs or default judgements.
- The age of the credit file.
- Repayment history on credit accounts.
- Details of accounts that have been opened and closed.
The following are the score bands used in Australia:
- 800-1,000 = Excellent
- 700-799 = Very good
- 625-699 = Good
- 550-624 = Fair/Average
- 0-549 = Weak/Below average
In the event a person has a less than good credit score, it would be difficult to obtain a loan from a traditional lender such as a bank, yet with online finance companies, the credit score is not the only thing the lender takes into account, and even those with a bad credit score are able to obtain a personal loan. The online lender also offers debt consolidation loans for people with bad credit, and thousands of people have become debt-free thanks to such a loan.
Applying For A Mortgage
When a person wishes to apply for a mortgage, they should first find out what their credit score is, and if it is less than good, they are advised to clear any outstanding debts, which would improve their credit score prior to applying for the home loan, thus improving the chances of success.
Personal Or Business Loans
If you have a perfect credit score, borrowing from your bank is not likely to be an issue, as you have a good history that shows you are a responsible borrower, and providing you can demonstrate you have enough income to make the monthly repayments, the loan would most probably be approved. If, on the other hand, your credit score is not as good as it could be, you can approach an online finance company, and in most cases, your loan application would be approved.
The great thing about using an online credit broker is the speed with which they operate; it is not unusual for a person to receive pre-approval on a loan application within an hour of submitting the forms, and often the funds are transferred into the borrower’s account on the same day.