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Importance Of Understanding Your Credit History Before Consolidating Your Debts

In simple terms and phrases it can be said that you will not be able not be able to get a debt consolidation loan if you do not have a high credit score. Enough said? No, not really. You will need to know the consequences of having a low credit score as well.

Banks and NBFCs rely heavily on your credit score to grant a loan and approve your loan application. That means it is important that you understand and learn about your credit history in the first place and then look for ways to improve it so that you get the desired debt consolidation loan.

Knowledge of your past and rectifying it will secure your future and improve your financial health. That means, in a nutshell, it is your credit history that will have an impact on your present as well as determine your future.

  • All your actions that you may have taken in the past regarding your debt and money management will tell everything about your credit behavior, money spending habits and debt management abilities.
  • All these are recorded in your credit history and are expressed within the three digit figure of your credit score.
  • This score will typically range between 300 and 900 as beyond these two extremes is highly impossible and unnatural credit score.

However, higher your number better will be your credit score and the chance to get the debt consolidation loan at a lower rate of interest and more favorable terms and this is true whether you apply for such a loan from a bank or any other source such as nationaldebtrelief.comor any NBFCs.

What does this mean? It means that as much as it is elementary that you know that in no way a good credit score is negotiable, but it is equally important that you know for sure about the constituents of the credit history as well as how it may affect your financial health and borrowing ability.

About credit history

Your credit history is actually a mix bog of many things and different factors. It will reflect all your previous credit behavior. Therefore, it is important for you to know that each of these factors will tell a lot about the different weights that these carry and how it affects your overall credit score. 

To know everything about your credit score, you will have to look for the following factors:

Your borrowings:

This is the first and perhaps the most important thing to check as this factor affects your credit history the most. This borrowing can be in a large variety of forms of debts but the most significant one of all that will affect your credit score are the credit card debts.

One of the primary reasons to consider this factor to be most important is that all your active as well as inactive accounts will be shown under this specific factor. That means that there is a significant chance that all those account that do not belong to you are shown under thins factor and this is a serious issue. This is because your credit score may be affected due to someone else missing their payments.

In such situations it is paramount that you get it rectified. You must report such cases as soon as you notice these to the credit bureau and get it rectified. Apart from that, your credit report may also reflect some other issues such as:

  • An old credit card debt that you may have paid off after settlement
  • There may be issues such as a mention of a credit card that you did not apply for it explicitly due to a mismatch in the security number.

Therefore, make sure that when you check your credit score you look specifically for such mismatches and erroneous entries and review these accounts. Get all these disputesthat dobelong to you rectified.

  • Furthermore, you must check out that all your borrowings are properly categorized under positive and negative accounts.
  • In this aspect the positive aspects are those loan accounts in which you have been making payments of your monthly bills on a regular basis. On the other hand, the negative accounts are those that have a few or substantial outstanding that you still need to pay up.

There is no point for guessing that more the number of such negative accounts is in your credit report lower will be the credit score. Therefore, while analyzing your credit report if you find that that are more than one negative accountin the credit score you must make sure that you approach your creditor and insist that these outstanding amounts are cleared at the earliest.

When it comes to borrowings you may think that if you do not have any loans or borrowings it will not affect your credit history and it will look good. Unfortunately, this is the case with most of the borrowers regarding such profiles and inevitably they end up with a very low credit score. This is not good at all for your credit score as the money lenders will not know how they can gauge your borrowing power.

Portfolio age:

This is the next important factor to consider as this will not only affect your credit history but this is the factor that most of the money lenders look for. This is because they feel very safe to lend money to seasoned borrowers.

This means your performance as far as the oldest credit is concerned will play a significant role to determine both your credit history as well as your credit score. In simple terms, the older the credit it will provide the creditor with more insights regarding your credit behavior.

At this juncture you must know that recent credit will provide partial positive points and therefore experts suggest that you should not close any of your good and old standing loan accounts especially for your credit card debts. This will inevitably bring your credit score down which is the last thing that you want.

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