Credit history is the record of how a person has managed his or her credit in the past including total debt load, number of credit lines and timeliness of payment. Having good credit history means paying your bills on time and not carrying large amounts of debt. Good credit history encourages lenders to extend credit with favorable set terms. Borrowers can also use positive credit history as an alternative collateral to traditional physical collateral.
Good credit history is very important when seeking to acquire loans and can be built in the following ways:
Repaying loans on time
Making loan payments on time, every time, is the most important thing you can do to help build your credit score. Having good credit scores means you have been managing your debts responsibly and repaying loans on time, which means you have good credit history that encourages lenders to allow none to access credit at favorable terms. One should consider making regular payments on outstanding debt rather than paying it off outright, in order to build a positive record. Pay more than just the minimum payment amount to reduce the amount of interest that you will owe over time, which is evidence of financial responsibility.
Managing your credit accounts
You should have no more than three or four credit cards, keep their balances low and have them for a long period of time. This helps you avoid looking potentially risky to lenders. Long-standing credit accounts that are consistently settled in full reflect positively on your repayment reliability, which in turn boosts your credit history.
Applying for new credit sparingly
Applying for multiple credit cards in a short period of time can be a red flag for potential lenders on your ability to repay the loan. Pace your credit requests, especially major loans, and only apply for credit that you need. This portrays responsibility.
Becoming an authorized user
Become an authorized user on the account of a trusted family member or spouse who has a long, responsible credit history. By having your name attached to their line of credit, you can reap the benefits without worrying about the responsibility of payment.
Making careful financial decisions
Poor financial decisions can lead you to max out your credit cards, which will put you at risk of bankruptcy. Credit history that has a sign of bankruptcy pushes lenders to ask for high interest rates that could have been avoided if financial decisions were made carefully.
Family Bank provides great credit facilities such as mobile loans, salary loans, salary advance, check-off loan and mortgages that can help cater for your needs.
To access Family Bank loans and mortgages, visit https://familybank.co.ke/family-bank/