6 loan myths that have been debunked
“Just because it’s been said many times by many people doesn’t make it true”
General
A poor understanding of credit scores is usually what leads to this misconception. To help dispel such misconceptions, here are a few factors that actually play a role in lowering one’s credit score.
We’ve mentioned too many times the negative impact of late loan repayment on an individual’s credit score.
To merit an increase in credit score, a timely repayment of all bills and loans is required. Also, a delay in debt repayment causes a reduction in credit score. In cases where one is unable to meet up with an agreed-upon repayment date, it’s important to inform the lender early enough, to restructure a more flexible T&C.
An individual with more unpaid debts, has a higher debt-to-income ratio. If such individuals are shopping for loan, they’re seen as not creditworthy enough to sufficiently cater to their loan. Therefore, we can say that a high DTI level reduces ones credit score and also their chance of securing a loan. Find out more about the impact of DTI on your loan application.
There’s a common saying; “If you’re everywhere, you’re nowhere”. This holds for borrowing as well.
If you’re actively seeking credit from various sources in a short span, it might signal financial distress or overextension. This can raise concerns among lenders about your ability to manage additional debt, hence affecting your credit score negatively. Although, the impact of these inquiries is typically minor and does diminish over time.
Inconsistent and inaccurate information in an individual’s credit report can potentially reduce their credit score. It’s of utmost importance that all documents containing an individual’s financial details should reflect similar and accurate information. Lenders may view discrepancies in any of these documents as fraudulent, which can lead to a decrease in credit score.
We consider loan default as the ultimate destroyer of credit scores. Worse yet, a borrower who always defaults on their loan will significantly decrease their credit score.
Defaulting on loans severally, shows an inability of an individual to fulfil their financial obligations and thus leads to a negative impact on their credit score.
Now that we’ve answered your question, let us help you confidently secure a loan that’s the right fit for you. Send us a message now at support@irorun.com!
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