SolveYourProblem eLearning Series:
Help Me Improve
My Dreadful Credit Score
(
26 pages )
Loans and Your Credit Score
Loans affect your credit score more than almost any other item
on your credit report. The types of loans you have, how
long you have had loans, the amounts you owe and your payment
history on your loans has one of the biggest impacts on
your credit score. If you can control your loans, you can
boost your credit score. There are a few tips that can
get you well on your way to painlessly managing your loans:
Tip #68: Refinance loans.
If
you got a poor deal on a loan - especially a major loan such
as a car or home loan - or if your credit rating has improved
since you got your loan, you may want to consider refinancing.
Refinancing means that you take your loan to another lender
in order to enjoy better terms or rates.
You
don’t want to do this too often - it prevents you from developing
long-term relationships with lenders and results in inquiries
on your credit report - but if you have good reasons to refinance,
it can actually help you repay your debts. For example, if
you can get more reasonable monthly bills that you will actually
be able to repay, refinancing can help prevent all those
non-payment credit dings that come from not being able to
pay your bills. Making your payments more affordable can
save you money and can save your credit score.
In
the short term, refinancing can push your credit score down,
as you will acquire inquiries on your credit report as you
look for a new lender and as you close old accounts and open
new accounts. In the long term, though, refinancing can be
a good way of boosting your credit score. If you are now
missing or delaying payments because you cannot afford monthly
bills, for example, refinancing a loan or two can be a good
way to get back on track and can get you repairing your credit
score again.
Tip #69: Look for loans that are offered
for bad credit risks.
If
your credit score is bad but you need a loan, consider services
that cater to people with poor credit scores. These companies
know that some creditors with poor credit scores will still
make their payments on time and so are willing to speak with
debtors other companies would reject out of hand. You may
have to deal with higher interest rates, but choosing a bad
credit lender can go a long way to ensuring that your credit
score won’t disqualify you for a loan.
In
the long run, you can always refinance your loan to take
advantage of a better rate once your credit score improves.
Tip #70: Always know your credit score
before speaking to lenders.
Many
people assume that having an excellent credit score is enough
when applying for a loan. It is not. Some lenders are not
terribly scrupulous about offering you the best rate - especially
if they can gain by having you pay higher interest. Some
lenders will try to tell you that your credit score is lower
than it is and that disqualifies you from a better rate.
Some may rely on your ignorance (or what they think of your
ignorance) about your credit score to quote you a worse rate.
Never
let a lender do this. Always look up your credit score before
shopping for a major loan and if you are quoted a rate you
think is unfair, speak up and tell the credit officer that
your credit score of 700 (or whatever the score is) seems
to indicate a better loan.
Show
the lender your printed copy of your credit score. If the
lender tries to tell you that lenders get more accurate credit
scores than customers who look up their own credit scores
or tries to tell you that your credit score has changed,
walk away. There are many reputable lenders out there. Find
one of them rather than relying on a lender who will try
to lie to make a profit.
Tip
#71: Consider speaking to lenders face-to-face if you have
a bad credit score.
If
you apply for a loan over the telephone or online, your credit
score will count the most, because that is all the lender
will likely look at before getting back to you with a quote.
If you have bad credit but still need a loan, meeting with
a lender face to face is your best bet because an actual
meeting allows a lender to get an impression of you, and
allows you to explain the problems you have had in the past
and the things you are doing now to make yourself a better
credit risk.
When
you meet worth a lender in person, you force them to stop
looking at you as a credit score number and make them look
at you as an entire person. This can be a huge advantage
for you (especially if you are personable) and can help you
get the loan your credit score does not completely qualify
you for.
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