The word credit rating is a measure of your ability to repay. The term is used by lenders to determine how much risk they take when lending money to you. A person with a high credit rating has a high repayment capacity in the future, and therefore poses a lower risk to the bank. The result is a high probability that the loan will be granted, a higher loan ceiling and a lower interest rate.
For example, people with a high credit rating are people who own their own housing, have a high and regular income and no or a single loan. A medium credit rating can mean that you rent your home, have some loans and a medium income. A person with a low credit rating usually has many debts, payment notes and no assets, such as tenancy.
How do you calculate the credit rating?
There are a number of different services used to calculate the credit rating, of which UC is the most common. There are a number of different things in the calculations. The most important thing is your income. Wages are calculated as income from permanent employment. If you go to a cash fund or a grant, this is not counted as income. Then there are things like whether you are married, have children who live at home, whether you live in rental or condominium, and how high your expenses are each month. You also look at your repayment history and loan history. If you have had many smaller loans and have also had difficulty repaying these, your credit rating will be lowered.You simply look at your overall life situation to assess your future ability to pay for the loan you want.
The number of inquiries and the credit rating
It is important to know that the number of inquiries (credit information) affects your credit rating, regardless of whether the loans were granted or not. The reason is that this indicates that you had a hard time getting a loan granted earlier, or that the money was not enough and that you want to borrow even more money. Therefore, in order not to lower your credit rating unnecessarily, you should avoid applying for many small loans regularly, it is better to then wait and take out a larger loan on an individual occasion. One should also be aware that a credit card is considered a continuous request. If you have one but you don’t use it, shut it down at once.
What are payment notes?
A payment note is recorded when you have failed to pay a bill, after which it has passed on to the Corona Magistrate for measurement. Thus, you do not receive a payment note just because you pay a bill late or if it goes to a debt collection company. It is only when you do not pay the bill from the debt collection company, and it goes on to the petitioner, that a payment note is registered. There are thus many chances to pay the money before a payment note is registered.
When you have a registered payment note, it remains in your register for one year, regardless of whether the debt is paid or not. This has a negative impact on creditworthiness as it is a clear sign that you have neglected to pay your debts on time.
Some lenders grant loans despite a note of payment, provided that your life situation is otherwise arranged with a regular income and a reasonable number of other loans. However, one should expect a slightly higher interest rate in that case.
Here’s how you affect your credit rating
You should always ensure that you have as high a credit rating as possible, since it regulates all occasions where a credit check is done. This applies not only to loans, but when you want to rent or buy a home, sign up for a mobile subscription or sign up for a credit card. To avoid lowering it, you can do the following:
- Make sure you have a high and regular income
- End as many of your loans and credits as possible
- Avoid drawing too many requests
- Only borrow if you really need and no more than you can afford
- Pay bills on time
Credit check manual
Finally, we will present here the concept of “manual credit testing”. This is something that a lender can use if your future ability to pay is good, even though you have problems with the economy before. For example, if you have a payment note that comes from a very small bill and if it is paid, the lender can nevertheless grant you a loan in a manual credit check, provided you have a stable income and an organized life situation in general. This is up to the individual lenders and they all have different requirements in their manual credit checks.