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A credit report is a document containing detailed information regarding a person’s credit history, which in turn plays a critical role for lenders to assessing creditworthiness.
The credit history can consist a diverse set of information including those of:
- What loans have been taken
- What loans have been fully repaid
- What loans have are still currently being repaid
- Number of credit cards and with which bank
- Bad debt settlements in the past
- Recent repayment behaviour
These information helps a lender calculate a credit score which determines a person’s creditworthiness.
It must be noted that different lenders would have their own sets of protocols in assessing creditworthiness. But the variables used to run these numbers are the same as they are gathered from the credit report.
This is why at the point of a borrower’s loan application, one of the first things that a lender would do is to retrieve the borrower’s credit report.
This is so that the credit rating of the borrower can be quickly determined.
If the result is a satisfactory one, then the application would be sent to the next stage of credit assessment.
Should the result be a negative one, then the application would not even get to the next stage and be denied almost instantaneously through an automated system.
The exception is when a particular credit facility was conceptualized specially to cater to people with adverse credit records.
One don’t need to have exceptional credit in order to get past this stage. A satisfactory credit would usually be good enough.
But those with exceptional credit might be offered better terms on a credit facility.
While there is no official guide to how to build good credit, it is generally agreed that a person who consistently makes full payments to debt obligations each month would at least be able to obtain a passable credit score.
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