Personal credit rating is an analog of the scoring that is actively used by banks and microfinance organizations (MFIs) when issuing a loan. Each credit bureau uses a specific set of variables that are taken into account when calculating this rating. Such a tool allows the future borrower to assess the chances of taking a loan, including a mortgage.
The rating itself is formed on the basis of the borrower’s credit history. It takes into account many factors – for example, the number of open and closed loans, the total debt burden. It is important how a person serviced or services loans, what kind of loans they were, for what amounts and terms.
But the most important thing is the presence or absence of delays. As a result, a certain score is formed. The higher this score, the lower the level of the borrower’s credit risk.
Based on the level of an individual credit rating, banks decide whether to issue a loan or not. For the borrower himself, this is an opportunity to assess his ability to get a mortgage loan.
How to start credit history?
Something is always done for the first time, including credit history. It is important not to fuss and not send applications simultaneously to all banks. How to start a credit history? You need to start with small loans, but there are a lot of options.
For example, buy a new product for your family by ordering an installment plan from a bank representative in a retail network. You should slowly pay off the debt within the period specified in the loan agreement.
Microloan in MFI
Microfinance companies work with clients with no credit history, insuring risks with high interest rates. Apply for a short-term loan from an official MFI, return it at a grace period – save on interest and open a credit score.
In order to avoid delays, it is worth:
- carefully reading the terms of the contract;
- drawing up a payment schedule.
You can increase the degree of trust by applying for a credit card issued by a bank with which there is a desire to continue cooperation. The presence of a credit score with this type of lending is not required, as well as confirmation of solvency.
When planning to get a mortgage, build a positive reputation by first taking a small express payday loan for consumer needs. Keep in mind that a client without a history will be approved for a loan, perhaps not on the most favorable terms. You can be sure of raising your status but having coped with responsibilities.
Loan with security
The availability of security in the form of expensive property will allow the bank to be confident in the timely debt repayment. Having issued a loan secured by a car or an apartment, the main thing is to make payments accurately and close the debt on time. In this case, the property will remain the property of the owner and the credit history will improve.