At some point in life, you may be hard stuck for cash, so you resort to taking a loan or credit. However, you are denied the loan.
You will be left wondering what might have transpired since you have never taken any loans before.
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According to many people, the loan might not get approved if you have ever taken and failed to repay it on time or decided to default on it. After all, that’s the main reason that would make lenders fail to approve a loan for any individual. But that’s not just it.
Many other reasons would prompt this, and having no credit history is one of them. So how does this impact your chances of getting a loan approved? Read along to get all the answers.
Why is Credit History Relevant?
Whenever you apply for a loan, the lender has to consider the limit you should be given, the interest rate at which you should be charged, and, most importantly, your ability to repay that loan. These lenders do not have unlimited funds, so they ought to make an informed decision before issuing out loans to borrowers.
Before they decide on your fate, the lenders often go through your application data and your credit history. If at all you don’t have any, another good option many make use of is to get credit cards for people with no credit. These, however, this will limit you to the choice of card.
Why should you build your credit?
Some of the top reasons why you should consider building your credit include:
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Better approval rates – with a good credit score, you have higher chances of getting a loan approved.
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Lower interest rates – the interest rates you are charged on your loan or when you buy goods and services on credit is directly proportional to your credit score. If you have a good credit score, you have better chances of getting more competitive rates with lower financial charges. If these interest rates are lower, then your ability to repay the loan much faster is boosted.
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Leverage – with a good credit score, you will have the negotiating power to get yourself better offers. These include better terms for loans and credit cards & lower interest rates.
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An emergency resource – whenever life hits you with some emergencies that need to be taken care of, a good credit score will be your lifesaver. It will be much easier for you to secure yourself a loan or credit without any issues. This, therefore, provides you with a sense of security in life.
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Higher credit limits – a good credit history makes it easier for you to land yourself on higher credit limits for both credit cards and loans. Moreover, one can maintain a stellar debt-to-income ratio, which is also used to improve the credit score. -
Better car insurance rates – your driving records are not the only ones used by insurers to determine your monthly or annual premiums. Your credit history is also pulled out mainly because, according to them, those people with low credit scores are much likely to file claims all the time; hence, they are charged more.
With a good credit history, you are more likely to enjoy lower charges.
Bottom line
In a nutshell, having a good credit score is essential if you want to enjoy the numerous benefits that come with it.
However, if you are still new to this sector and would wish to get loans, you can opt for credit cards for people with no credit, and from there, you can begin to build it gradually.
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