A borrower’s credit history is one of the most essential factors that shape the lender’s decision to approve an application for a loan or not, and the credit history is the first thing that the lenders check as the very first step.

In most cases it’s useless to apply for a bank loan if you have a damaged credit history. What’s more, just like delinquencies, frequent loan applications negatively affect your credit score.

So what is a credit history, under influence of what factors is it formed, can it be repaired if you made a mistake with defaulting on your obligations once?

What makes up your credit score?

A credit history reflects financial reputation of a person, and the information is mostly used by lenders.

It’s a loan ‘map’ showing if a borrower has fulfilled (or is fulfilling) his/her debt obligations in good faith.

It’s important to understand that credit history is influenced not only by loans ever taken, but also by data on your bill payment history, periods of unemployment, unpaid bills (cable, utility, medical, etc.).

What affects your credit file?

It’s much easier to spoil your reputation and be assigned a ‘bad debtor’ label than to earn trust back again.

What you shouldn’t do?

It’s something that only unreliable borrower who can’t plan his/her expenses well and doesn’t possess a good payment discipline would do.

Often it means that you are in desperate need of money and you are not particularly picky when choosing a lender.

How can you get your credit report?

Currently, there are several ways to obtain your credit report: you can request the data online or by email.

Usually you should contact a credit bureau but you should know that several bureaus may keep your data. The only exception are so called ‘soft inquiries’ that don’t affect your credit history. Banks use them to forecast a credit limit, as well as some credit score monitoring companies.

In addition, today virtually every major bank offers a service of obtaining your credit file through online banking.

There are quite a lot of the Internet resources that can provide you with an online credit report. All you have to do is to enter your ID and pay a fee. However, if you choose this option, you need to make sure that you interact with trusted companies. Otherwise, some scammers may access your ID, which itself may cause certain issues in the future or cause credit institutions to refuse to approve your loan application or even lead to your identity theft.

As a rule, you should request your credit history once a year. Don’t do it too often because each inquiry is shown on your profile, which, in turn, may affect your portfolio and, as a consequence, your future loan approvals because lenders may think that you were trying to borrow loans from several credit institutions at the same time.

How to improve it?

It’s impossible to exclude information from your credit file, but there is an opportunity to improve your reputation by adding positive information to it. If information about timely repaid loan appears in your credit file, it will certainly look more appealing.

One certain way is obtaining online loans. It’s a quick and inexpensive solution.

If you borrow and repay a loan in a timely manner, the lender will send a positive data to the credit bureau, which will later be reflected in your profile. It takes 14 to 15 days to update information.

It doesn’t cost much, but it’s worth it, because the more appealing your credit file is, the cheaper each subsequent loan gets and the more favorable terms you’ll be offered.

Guarantors will come to the rescue

However, currently it’s not that easy to borrow money from any lender if you have negative credit reputation because even “understanding” lenders aren’t willing to approve applications from unreliable clients, but they are certainly not as rigorous as banks. Many of them work with borrowers whose credit file is far from perfect if loan repayment is secured (by guarantors or a collateral); and you can take advantage of that.

Yes, now guarantors’ service is available in online lending. It is easier to obtain secured loans: with such security your application will be 100% approved.

On top of that, a loan guarantee allows you to lower the loan rate. While a lender offers its new clients a rate of approximately 2% per day, when applying for a crowdvouched loan, the rate will be decreased to 0.33% per day.

And it’s not necessary to look for guarantors among your acquaintances and friends, you don’t even have to inform your relatives about your temporary financial struggles. Instead, you can find guarantors among users of Suretly platform. All you have to do is to pay a small fee for the guarantor’s service, and you can obtain a loan at a reduced rate from the partners of the service within 5–10 minutes. In Russia the platform’s partners are Amigozaim, Zolotoff and Max.Credit. And this year the service will be launched in certain other countries as well.

Conclusion

Knowing your credit reputation, being able to respond to the data submitted to your credit file in a reasonable and effective way will help you avoid many adverse situations.