If you have defaulted on your payments to a financial institution or have not been able to properly keep up with the interest rates, mortgaged your property to more than one financial institution, fallen behind on your emi payments, defaulted on necessary utility services such as electricity and water supply and have failed to properly pay your taxes to the government, you may be categorized as a person with a bad credit history, thus making it difficult for you to secure further loans when you need the money desperately.
The rejection of your loan application by one bank after another is also a bad sign, as it confirms that you are being viewed as a high risk loan candidate who is likely to fall behind on his payments and maybe even go insolvent for being unable to pay his loans. Your only recourse for borrowing money is then limited to the sub-prime market where the interest rates are exorbitant, bordering on usury and you have no choice but to comply with the conditions that you know will leave you in a worse financial status than before.
Credit reference agencies assess the risk posed by a potential customer by looking through his electoral roll, behavior patterns, social status and image in the community, reputation in the market or the employment sector, opinion of colleagues at work, county court judgments for financial, civil and criminal lawsuits and of course the past history in making payment on loans. Every loan leaves an electronic record on the database that is used by the banks to analyze your status as potential customer and decide whether to grant your application for your loan or not.
Credit ratings can be improved by ensuring that all your outstanding debts are in accordance with your proper social details such as name, address, place of employment, salary and expenses. You should check your database carefully to ensure that no other person is being confused with you while you are taking a loan from the bank. Registration on the electoral roll goes a long way to establishing your image as an honest hardworking person capable of meeting his obligations.
Applications for loans must not be too frequent as it exhibits to the financial institutions that you are in a desperate state for money and that your financial situation is extremely unstable. Asking the bank for a quotation instead of a credit rating is also a good method for ensuring your credit rating remains high. Regular payments on loans, or at least the interest on loans is a major step in improving your credit rating with the banks by demonstrating that you are a responsible buyer who is able to pay back his loans. Keeping to the terms of the contract without deviation is also a good way to improve credit ratings. Above all, banks must view you as a sound investment able to recoup their expenses if you are hoping to get loans when you need it at reasonable rates.
S. Bag is a finance writer. He has written many articles on various topics like finance. He loves to write finance article & recently he written on fast loans for pensioners & apply now for a quick loan.