Most of us want to take out a loan to finance the desired plans and goals. However, for this to happen, you need creditworthiness and a positive credit history.
The credit history is really all the information collected in the Credit Information Bureau about the payer’s liability and obligations in repaying current and past liabilities. Creating credit history is primarily affected by the timeliness of paying your debts. If we pay all liabilities regularly, then our credit history will be positive.
This positive history of previous commitments is the basis for the bank to be able to trust you. If in the past you have conscientiously repaid a loan, installment or loan, your chances of a positive credit decision increase and are an argument for the bank to grant you financing on good terms. You can then count on a lower margin or commission, longer repayment period or a higher loan amount. From the bank’s point of view, a person who already has some experience in paying back installments is more reliable than the one who makes such a commitment for the first time.
How to create a positive credit history?
Many people who have never incurred any financial obligations and now want to take a mortgage for an apartment, for example, are convinced that they will get a loan without any problems. In fact, such a “blank card” is not a guarantee for the bank that we are credible and we can safely give us a loan. On the contrary, we are a big unknown to the bank.
So before you apply for serious loans, such as a mortgage, you need to build a credit history. How to do it so as not to incur unnecessary additional costs?
- You can apply for an account overdraft, eg USD 1,500. You may not use it at all, but the information that you have it will go to credit checker and will allow you to start building a trusted borrower;
- You can take a small cash loan at the bank and pay off your debt regularly;
- Another way is to set up a credit card. Taking interest-free loans and paying them back regularly will help build a positive credit history;
- You can buy the equipment in installments – yes, this information will also go to credit checker. Many stores now offer 0% installments – it’s worth using this option, even if we have enough funds to buy the item for cash;
To sum up, the best way to develop a positive credit history is to pay off all financial obligations in a timely manner. Leading into debt will result in a negative entry in the registers of debtors, and will also deprive us of the possibility of applying for a bank loan in the future.
Positive story or no story?
Lack of a positive credit history is the most common problem for young people. Such people usually will not get the first loan from the bank because they have an empty credit checker history. The Credit Information Bureau stores information on all loans and credits we have repaid, repaid or arrears. Credit checker primarily collects both positive and negative data. Lack of credit history is unwelcome, because the customer with an empty credit checker is a big unknown for the lender. Lack of information on how we handle repayment of loans means greater risk.
Your credit history is a ticket to extra money. However, it does not affect your credit standing. Every young person who wants to take out a loan must build their credibility, eg by shopping in installments or using credit cards carefully. Non-bank companies that offer loans from 18 years of age also meet the expectations of young people. Responsible and informed building of your credit history can make it much easier to take a bank loan.