One of the most loathed factors for the rejection of any loan facility is bad credit. For credit scores that are just unsatisfactory, lenders can still grant loans with less favorable terms. It is those with bad credit who can get an outright rejection without any real explanation from the lenders. But usually these people will know that somehow the way they are managing their money has something to do with it. So what have you done to screw up your credit report? Here are some obvious activities.
Bank actions
Things like foreclosures, bankruptcies, asset repossessions will take you down faster than you can do anything to rectify it. That’s not to say there is anything you can do. You don’t want any government agency or financial institution to take action on you for any debts. Credit-wise, It will be very tough to get out once you get yourself in.
Late payments pass due
Grading comes in blocks of 30 days. So only late payments of over 30 days are recorded in your credit report. 30-day late payments are still tolerable by many lenders as it is still the first tier of lateness. Sometimes, people forget or have other legitimate reasons to do so that has nothing to do with being in a personal financial crisis. But when you get to the 60-day mark and beyond, some lenders will reject your credit facility applications just from this one item. This is especially so for unsecured lending when there is more risks involved.
Debt settlements
Debt settlements refer to those transactions where a lender agrees to accept a lesser amount than you owe to settle a debt. You will be released from liability once you repay this agreed amount. But because these settlements are not a proper full repayment, is seen as something like a bad debt by financial institutions. This is a big ticket item that does more harm than late payments.
Exceeding your credit limits
This usually happens with credit cards and overdraft accounts. An over drawn checking account will cause your check to bounce. But for credit cards and overdrafts, the card issuer will allow these transactions to go through… at a higher rate. And the leeway is not much. These overdrawing activities will show on your credit report. But if you are to promptly top up the deficit at the end of the month, it will show in your credit report as well. So if you have indeed overdrawn, do not apply for any new facilities until another month later where your credit history shows the good that you have done.
Involuntary account closures
When a bank decides to take matter into it’s own hands and close your account even though you have vigorously objected to it, it paints a picture to others who are interested in your credit. It will also show whether the account was closed with a balance or without. If involuntary closure is a black mark, one with an outstanding balance is the icing on the cake by underlining that black mark.
Multiple queries
Many people cannot reason why multiple queries on your credit report can have a negative impact on it. I don’t agree to it either. But it’s a fact and we should accept it as it is. The reasoning is that an individual must be desperate to get his hands on some credit that he is applying for it with every lender he sees. And it must be that lenders are rejecting his applications from all directions that requires him to go from one to another constantly to try his luck. So don’t try to be funny and behave if you don’t want unwanted attention on you.