Checking Your Credit Score
Your credit score impacts on your ability to secure different forms of financing at an affordable rate. When you are looking for financing, whether a mortgage, credit card or any other lending option, you’ll want to check your credit rating because lenders use it to determine the level of interest you should pay. A low credit score can significantly increase the interest rates you are offered on loans. In some cases, lenders may refuse to approve financing when your score is too low. You may need to consider other forms of debt relief Innisfil to sort out your financial issues.
What affects your credit score?
There are numerous factors that lower your credit score. The obvious ones are missed or late payments and loans you have defaulted in the past. Did you also know that checking your credit often can actually lower your score? While this is not always the case, there are some situations where you end up applying for credit and it lowers your score, even though you did not end up taking up the loan. There are also some exceptions. For instance, if you check your credit score on your own, it doesn’t affect your score. The only difference comes in when a lender or credit facility checks your credit.
Why you shouldn’t request lenders to check your credit often
When an institution that grants credit checks your rating, it is presumed that you are actively looking for financing. Research has shown that people who are often looking for credit are more likely to default on loans. They are considered riskier borrowers than people who don’t often request for credit. This is regardless of whether you’ll end up paying the loan completely.
Credit reports will list the borrower’s credit inquiries. This gives institutions an idea of the kind of borrower they are dealing with. When you have too many credit inquiries in your report, it could ultimately affect your overall score. It is an indication that you are likely going to have a hard time paying for all that you owe. The credit bureau will therefore reduce your score if you have so many credit inquiries within a short period of time.
What happens when you’re shopping for the best rates?
Sometimes it is understandable that before taking up a long-term loan like a mortgage or even a car loan, you may need to shop around for the best rates. This means you would approach different institutions before settling for the right one. Credit bureaus take this into account and will therefore count all those inquiries you made within that period as one. These inquiries will only be counted as one if they had occurred within a few weeks.
What amount will the score be lowered?
This will depend on many things such as how up to date you are with your current payments. For most people, making a couple of inquiries per year will have a very small impact, if any, on their credit score. However, if you already have a low score that indicates you haven’t been using the credit you already have responsibly, credit inquiries can have a significant impact on your rating. Consider debt consolidation Innisfil to manage the credit you already have.