Loans can be a burden but are at times necessary. You may at one time or another find yourself in dire need of some money with your salary still days to hit your account. It is also common to take out loans for medical and other types of emergencies. While these loans assist us in alleviating a problem when in need, they can also have a negative or positive effect on your credit report. It all depends on how you borrow, and how you repay. At Realistic loans, you can find quick-fix loans without having to worry a lot about your credit score. Let’s look though, at some of the factors that impact your credit report.
When you take a loan, you will sign an agreement with your creditors on how you should repay your loan. You will be given specific periods in which you will be required to make payments until you clear the loan. Making your payments on time positively impacts your credit report making you an attractive borrower. If you fail to make payments on time, it damages your credit rating. Failing to pay even one installment has dire consequences on your credit report. This negative impact will hamper your chances of getting another loan when need be. If you project that you might be late on payments, you should talk to your lender to ask for more time to avoid negative ratings. This grace period has a limitation though.
When you borrow and pay on time, your credit rating improves making you eligible for more and better loans. You can have an even better rating if you have a variety of credit on your report. If you have borrowed for different purposes and managed to pay successfully, you get a lot more points. For instance, you might have borrowed a home and an auto loan and paid without any problems. The better your credit mix, the higher your credit score will be.
Inquiries on Your Credit Card
Anytime you decide to take a personal loan, your lender will make an inquiry on your card to determine your ability to pay that loan. The hard inquiry usually hurts your credit rating. A single inquiry can have you dropping a few points that last about a month. What you need to avoid is having multiple inquiries over extended periods. If you are shopping for a lender with the best rates, consolidate your applications in the shortest time possible like a week or so, so that these applications can be termed as one and minimize the negative impact on your credit rating.
Defaulting on your loans is the worst you can do to your credit score. If you fail to repay your loans, your credit ratings dive deep down. You might get a few more loans, but you will eventually not be in a position to secure any other with a history of defaulting. Lenders will have no incentive of advancing a loan to you since your card will show that you cannot pay.