Any time you apply for any kind of credit, from loans to credit cards, the lender will look at your credit history. Your credit history is one of the things that will help the lender decide if they want to extend credit to you.
Credit History
Your credit history details all of your past credit transactions. It includes loans, credit cards, and even your utility bills. It details how long it took you to make your repayments, and any missed, or late payments. It details how many applications you have made for credit. Your credit history can be viewed by requesting a copy of your credit report.
Whenever you apply for a loan or credit card, the company will contact one, or all three of the credit bureaus. The three credit bureaus are Experian, Equifax, and Transunion. You are entitled to request a copy of your credit report from each of them every twelve months.
When you receive a copy of your credit report, you should check it carefully. Look for any mistakes, and if there are any, you will need to dispute them with the credit bureau. You will need to gather evidence that the transaction is, in fact, a mistake, and make sure that you submit copies, not originals.
If your credit history is poor, then you may need to look at ways to improve it before you apply for a loan. Nicole Gates, an account manager at Creditcube.com online lender, says that there are a few things you should consider before you apply for a loan and a number of ways to improve your credit score.
“Before you apply for any loan, you should think about what kind of loan you need,” she said. “Some people need a long-term loan, others need an installment loan, and others still need a flexible loan. You should figure out which loan type suits you, and research lenders.” Ms. Gates says that anyone looking for a loan shouldn’t just research traditional lenders, especially if you have a low credit score. Make sure you research online direct lenders, and other alternative lenders, as she says they may be in a much better position to help you.
Ms. Gates also said that some people have a low credit score because they’ve never really had credit before. In this case, taking out a credit card can be a good way to improve your credit rating.
Credit Cards
There are a few things you should know before you decide to use credit cards to improve your credit rating.
First, not every credit card is the same. Each credit card company has different terms, conditions and interest rates. They also have a variety of credit cards available. The first thing you should do is think about how you spend money and the purpose of the credit card. If, for example, you can afford to pay the balance in full at the end of every month, then a credit card that has other reward benefits might be the best option for you. If you will be making partial payments at the end of the month, then you would be better looking for low-interest cards.
Once you have made a decision on which kind of credit card suits your needs best, you should compare similar cards from different companies. You can make applications to a few companies, as long as you do so within a thirty day period. Making applications for any kind of credit over a prolonged period of time can seem like you’re desperate, however, making applications over a short period of time shows that you’re simply shopping around for the best value.
When you have your credit card, you should try to only use it for purchases that you can afford. Ms. Gates suggests using it for groceries, or to pay a bill, and then pay it all off at the end of the month. You should also make sure that you pay attention to your credit report, and do take advantage of the one free copy per year, so you can see any improvements. You can request more than one per year, but you will have to pay a fee for the subsequent reports.
You will need to show that you are managing your credit card appropriately over a period of time to improve your credit score. Loan lenders are much more likely to consider you a good risk if you can show that you are already managing your debt level, and making your payments on time.
Conclusion
It’s extremely important to manage your credit history, and despite popular belief, never taking out a credit card isn’t actually a good idea. You need to have some form of credit to build up your credit history and credit score. It can be absolutely crucial to improving your credit rating before you approach any direct lender for a loan.
