Conscientious repayment of the loan without delays has a positive effect on the credit score. But what impact do other banking products have on it and how do they interact with them? Let’s figure it out.
A credit card is essentially the same loan. If you issue a card, information about this appears in your credit score. Active use of a credit card without delays has a positive effect on a score. But if you are not going to close it, it can negatively affect the issuance of other loans. A credit card is considered an open loan as long as there is no record of its closure in the credit score. If you apply for a new loan with an open credit card debt, the bank may refuse due to the debt load. But if your income allows you to pay off both a loan and a credit card, then approval is likely. You can apply for a credit card online.
Formally, early repayment of the loan does not affect the score. But it indirectly affects your reputation in the eyes of banks, especially if you often repay the loan ahead of schedule. In these cases, banks receive less interest and, therefore, earn less. Thus, not everyone is ready to issue a new loan.
As a rule, there is no item on early repayment in the report but there is a planned date of loan repayment and an actual one. The bank is considering these dates. If there were only a few early payments and most of the interest was paid, there is nothing wrong with early repayment.
Microloans affect credit scores in the same way as loans. If a borrower is repaid without delays, then things are going well, and if with delays, then the score is spoiled. But for banks, a person taking loans from an MFI (especially recently) is not a sufficiently conscientious client. The bank considers such a borrower unreliable and unsecured.
Therefore, why should they give a loan if no one repays the loans? Moreover, it does not matter how and what kind of loan was taken: online, fast, or interest-free. The data will be recorded in the credit score. How any bank would react to this depends on its internal credit policy. One thing is obvious: with an open loan, the chances are almost zero. Make sure to also check out what payday loans online at directloantransfer have to offer.
Credit History Improvement Programs at MFIs
Every third micro financial company offers a service for improving credit score. It works in the following way: first, you take a loan with a small amount, return it without delays, then take a larger amount, then even more. Thus, a score will be improved especially for other MFIs. But banks are reluctant to approve loans to MFI clients. But if it is enough to apply for a loan occasionally, then such an option is quite suitable.
The bank’s refusal is recorded in the personal history with a note such as “refusal due to the internal policy of the bank”. In principle, one or two refusals may not affect the COI as it also depends on how much money you need. But if there are more refusals, then some banks may not pay attention to the fact while others may also refuse or tighten the issuing conditions.
If the installment plan was provided by the store itself, it does not affect the credit history. The stores do not send data to the BCH. If the partner bank issues the installment plan, then everything is according to the standard: paid without delays, then you are great or your credit score is damaged with delays.
Refinancing is also a loan but with a specific purpose. There is no influence on the credit score because in history it is displayed as a regular loan: the client closed one agreement and opened another. Keep in mind that customers can refinance without delays.
Don’t confuse refinancing with restructuring. Restructuring is a renegotiation of the terms and conditions of an existing loan. You can restructure a loan only in the bank where you took it, you cannot switch to another. In the credit score, restructuring is most often reflected as a closed loan. Usually, restructuring is carried out in a hopeless situation when there is already a delay. This means that the credit score has already gone down. The information is stored on your credit score.
Even a day of delay is recorded in the credit report. Although there were cases when a client deposited money within a day and the bank did not send information to the credit bureau. If you are a couple of times a year late for a couple of days, your score will not drop much.
In general, banks rarely pay attention to delays of up to several days. Sometimes, even if you have a monthly delay, the bank can approve a loan. But the conditions would not be favorable. Still, some banks find it easier to approve a loan if there has been no delay in at least the last 90 days.