- Personal Finance»
- Mortgages & Loans
Untold Secrets Why Banks Disqualify People For Credits
Do not Take Loan You Can't Repay
Importance of Credit Rating
Your credit score is as important as your life history when it comes to lending from banks. Rejection from bank for a credit or mortgage, etc, has something to do with your credit record. I live in a country where credit cards or mortgaging is not part of everyday life like in most developed nations, but I have been studying the trend on credit cards, mortgages, loans, etc for most advanced countries like the United States, Canada, UK, Germany, etc.
Haven lots of family and friends residing in these countries, has also given me the opportunity to follow this trend accurately and to understand some of the vital secrets that lenders and borrowers needs to know, which I am about to share in this hub.
I have been researching on this hub for months now, knowing too well that it would be of great help to those running an MBA program in the United States for instance, yes, it did helped my brother who is about to finish his MBA at Lincoln University. Therefore, this hub is not only meant to guide borrowers, it is also expected to function as a research material for financial management students and the likes.
What is a credit rating?
In simple English, this is the aggregate score over years, of a borrower’s credit worthiness, calculated based on the borrower’s prompt repayment history. As you borrow or lend from bank or banks using credit card, you are being rated according to your ability and promptness in repaying your credits…it is simple. For instance, Mr. A and B comes to me to lend money every week, and at the end of each week, Mr. B repays his with all interest (if applicable), while Mr. A comes to me and plead for additional week, and they continue on this trend for say, five years…will I be wrong to rate Mr. B higher than A as long as borrowing from me is concerned? This is exactly how it works.
I had a friend, Bill, he is from the states, he once told me that he went to his bank for a car loan of $22000 knowing too well that his income is up to the task of repaying the loan in at least 2 or 3 years, but the bank turned him down for a reason he did not know. But while carrying out research for this hub, I then discovered why Bill was denied a loan, he had no credit image. What do I mean by this? I had to email Bill what i discovered, he replied me with an inspiring secrets that made me come to a conclusion of what made his bank to reject him for the loan. Bill had no credit card all through his university…he only had one in his father’s name. so I asked him fondly, “how do you expect them to lend you such a big money when they have no credit record of you to lay hands on?” this is one of the main reasons why Bill was rejected for a loan, because the bank have no history to judge if he is credit worthy or not, who wants to invest on a wind?
Reason number two: invisible credit reports. Before I explain this, I want to also let you know how I discovered this pretty secret of why American banks for example, reject people for credit cards or loan. Remember I told you that I have most of my best friends in the states right? Haven known that, let me tell you how Jenita helped me to discover this second secret of why banks reject people for credit cards.
Jenita is one of my best friends, and I have known her for some good years now…if not centuries…lol. She has always wished to own an Escalade SUV, so last year she told me that she must buy the car before the middle of this year, I wished her the best, at least, she is a hard worker, so she deserves the best that she dream of. Recently, Jeni told me she had applied for a loan to help her get the car, may be HSBC, so the bank phoned her that her loan application was not successful, she was so upset she had to rush to the bank to find out why and how?
To make everything short, during the whole discovery process, she discovered that even though she has been using credit cards for years if not decades now, yet, she had no credit record for the bank to lay hands on. She was so upset she asked them to go through her credit records and find out…there was none. When she told me about this ugly sad situation, I had no option than to get into my research room…finally, I found out the reason.
Dissappearing Credit Records
Her records are missing: her records were missing not for bad intentions, but for her own personal protection which turned out to be a blow. We found out that her bank did not allow any credit rating firm access to her credit history since she didn’t permit them to do so, which is in compliance with a recent American legislation.
This is most devastating to those that took up a mortgage from 1999 down, because the new legislation came into implementation in the year 2000. If for instance, you took up a mortgage in 1998, which may be a bit higher than the current mortgage plans now, you may find it very difficult if not impossible to remortgage to the new low rate mortgage plans, so what do you do?
Fix Your Missing Credit Records
Best way to repair your missing credit records
If you actually want to fix your disappearing credit reports or records, the first step to take, is to trace back your credit report. There are free trials to help you do this…callcredit or Experian can help you to do this for free before deciding to subscribe.
Why this is very important for you to view your credit records before seeking for credits, is because it will help you see exactly what credit houses or banks see when processing your credit application. It is also vital because, in most situations, you may discover some missing credit records…in such situation, please do not hesitate to give the lender a call to find out the problem and to fix it earlier.
Correct every single mistake
There are also some other errors that are bound to occur or appear on your credit record: closed accounts, joint accounts with an ex or former, electoral roll (ensure that your registered address in the electoral roll is correct, before you apply for a credit).
If you discover any error or missing information, seek for correction immediately. For instance, you missed a payment- you can add a short paragraph explanation why it happened.
Grant them permission to share your credit information
Before they can rightfully share your credit records with any credit rating firm or firms, you must grant them an outright permission to share the information with credit rating firms.