If you plan to start using a credit card, you should know that credit checks are usually necessary to start the process to obtain a credit or loan. It is normal and understandable that you want to know exactly what kind of personal information the verification reveals.
Doing these verifications is necessary to start the process of a credit application because lenders seek to collect information about you and your financial situation to determine if you could be an optimal holder of a credit card.
In addition, this process ensures that you will be able to comply with the fees and debts established by the lender bank.
Some of the data they collect is your credit score or loan reports, which can help them understand how you have historically managed credit.
If your history reflects a bad credit reputation, such as late payments, exhausting credit cards, and accounts in collections, you can run the risk of being perceived as an unreliable person. And with the dubious financial stability to comply with the responsibility and commitment that a credit card or loan requires.
If, on the other hand, your reputation is good and your history shows punctual payments, low credit balances, and canceled accounts, it is almost certain that you are an ideal candidate to obtain a loan and your opportunities will be much more abundant.
And that is why special care must be taken when it comes to our report and credit score, as they can be your best allies or your worst enemies, depending on what they reflect.
What information does your credit report reflect?
Credit reports are of great importance since it provides in a totally transparent way how you manage your finances in terms of credits.
That is why this data becomes so important for lenders because you have to take into account that it is the way that lenders know you.
A credit report also tells them a lot about your experience with various types of credit.
These are some of the most relevant aspects of a credit report and those that lenders look for when doing a credit analysis:
Such as the names, addresses, and dates of birth that are associated with your existing accounts and credits.
Some factors such as your job and your monthly income are very important to lenders, as this will tell them if you really can pay your debt.
This information will also be of great use to you in calculating your debt-to-income ratio so that you can ensure that your total debts do not consume too much of your monthly income.
Part of the work of the lenders is to do a deep analysis that allows them to determine if even going through a difficult economic situation, you will be able to pay the monthly payments and debts.
If it turns out that you have financial backup support such as emergency savings or an investment account, it shows that you are in the capacity to assume your debts and commitments despite the uncertain moments that you may be going through.
There is a type of loan called secured loan, which refers to a loan whose return is already assured, either a mortgage or an auto loan. This type of loan works as follows: if for any reason you fail with your payment and you cannot fulfill any of these loans properly, the lender will have the right to take your property and sell it to recover the borrowed money, it is a bit rough but efficient, as it is a way to guarantee that they will not lose money.
The loans you currently handle
This includes revolving credit accounts, tied payment dates, credit limits, and the current status of the loans or credits you have.
If you’ve been through bankruptcies
Lenders will also be able to see if you’ve been through financial bankruptcies, this is the only public record that appears on your credit report.
Your credit history reflects all collection accounts, both those that are currently open and those that are already resolved.
Your credit inquiries
This includes credit inquiries from potential lenders as well as potential credit card issuers.
How can you have a good credit report?
If you consider that your credit report is not good enough to meet the expectations of the lenders, you should not worry, there are several things you can work on so your credit history has a better presence and you obtain the loan you are looking for.
The quality and reputation of your credit report are reflected in points, called “credit scores”, it is a numerical representation of how well you have managed your credit history so far.
With 300 being a low score and 850 a very high score.
As we mentioned before, there are ways to make this number go up and we are going to tell you how:
Extensive credit history
If you have a credit report with long-standing accounts, it will make the lenders see that you are a responsible and stable person.
Having a good payment history
Always paying at the right time, being punctual with every debt helps create a solid foundation for your credit score and loan report.
If you demonstrate to carry several loans or credit cards responsibly at the same time, it shows that you are in the capacity to meet several types of credit at the same time without affecting any of them.
The fewer revolving credits you have, the better.
Well, although it seems not so important, having a lot of credit debt can question your responsibility with the loan payments.
You must keep in mind that if your credit score reaches 670 points, you should already be calm because it is a very good number.
And if you still have a little to go to get an optimal score, we are sure that you will be able to reach it if you work for it and put some of our recommendations into practice.
But, if you want to increase your credit score, you should know that all the personal and financial information will be used by direct and online lenders only for your loan application process.
Remember that before applying for a loan, you can apply some basic strategies to increase your score and get better interest rates, such as using your credit cards and pay them on time. Because yes, credit cards can increase your credit score faster than you may think if you know how to use them.