Credit scores play a paramount role to take out a loan; it is a numerical value between 300 and 850, which helps your lender know about your creditworthiness. The lower the score, the higher the default risk is, and the higher the score, the lower the default risk is.
Unsecured loans require neither collateral nor guarantor. Therefore, direct lenders are concerned about your paying capacity. Most of the lenders do not approve your application if your score is less than 670. If you get funds regardless of your bad score (less than 670), you will pay back the debt with a high rate of interest.
The journey from a poor score to excellent is not as easy as pie but it is not impossible too. Whether your score is good or bad, you cannot afford to have any defaults or anomalies on your credit report. Here are some mistakes that pull your score and reduce your chances of obtaining a loan.
Mistake #1: Never going through your credit report
Your credit report shows a number of credits with their status. The report helps your lender know about a number of defaults in your past. Whether your lenders disclose it or not, they ask credit bureaus for your report. Do not believe that bureaus cannot make an error. In fact, many people have failed to have loans approved because their report showed defaults without their knowledge.
Tip: You cannot afford to have a mistake in your report, which turns down your application. The first duty of yours is to peruse your credit report to detect any default or pending account that is not in your knowledge. If you spot any error, you should immediately contact your bureau to rectify the report.
Mistake #2: Applying for multiple applications
Every time you apply for a credit, search footprints are added to your report. These marks indicate that how many times lenders have visited your profile. Multiple searches within a short time indicate that you are in dire need of funds. You probably rely on only loans to meet your regular expenses and therefore you will not pay back the debt. In this situation, lenders will cast aside your loan application.
Tip: Do not apply for hard search applications as they pull your score. Online lenders providing unsecured personal loans in Ireland run a soft credit check, which disappears very soon.
Mistake #3: Credit card accounts in arrears
If you have several credit cards and most of them are overdue, your lender will consider it very risky as you have already under the strain of multiple Euros. While you apply for a personal loan, make sure that you are not handling another debt.
Tip: Settle all your credit card accounts and try not to max out them. Your creditworthiness will not be in question if you do not consume more than 30% of the balance. If you have multiple card debts, opt for zero-interest balance transfer. The provider will waive off interest and you will be able to easily clear all your dues.
Mistake #4: Not making regular payments
A default may generally stay on your report for around 5-6 years, therefore, missing even a single payment can be jeopardous. If you do not want hassle in future to have online loans in Ireland, make sure that you pay your debt on time.
Tip: The best way to be on the top of your payments is to tap into your finances. As you receive your monthly income, set aside some money for repayment of your debt.
In the nutshell, you will be able to maintain your credit score if you pay back all your debts on time. You should take out a loan only when you need it urgently. Do not overuse your credit cards to avoid a strain on your finances and regularly go through your credit report for any errors.