We send or carry our resume to the employer during the job interview. And when you borrow or apply for credit online, we bring your credit history with you. A summary of our financial obligations and how we have paid in the past for credit, communication, internet, and other services.
Let’s imagine. Apply for car leasing. In Lithuania, the decision whether to finance a car depends on credit risk expert John, and in the UK it depends on John. There is so much more to John and John than the root of the name. Both are responsible for their own financial institution loan portfolio. One thing is for sure: the manager will not praise the rise of bad loans in their company. Also, they both know that one way to prevent this from happening is to assess the credit history of every incoming customer. So, John and John look at the report.
And it flickers with inadequate credit, excessive obligations, or delays in paying for electricity, the internet, or the phone. Neither John in Lithuania nor John in the United Kingdom will agree to grant the lease, seeing such a “blanket” in the report.
What to do now? After all, we have been choosing the car model for several months. The recipe is. However, we will have to take some serious action before we clear out all that “dirt” from our report. Let’s do some serious homework. Because there is no recipe for improving your credit history “cosmetically”. So where do I start?
Let’s think before borrowing
It is not easy to change something when we do not know what. So first you should open up a report for yourself and take a look at our portrait of the lenders. Depending on what the financial institutions find in the report, the credit will be cheaper or more expensive, the down payment will be higher or lower, and the credit term will be longer or shorter. Sometimes the difference between the interest paid and a good and poor credit history can be up to a few thousand euros (or pounds if you live in the UK).
How do you look at yourself with financial institutions? Here are some links. If you live in Lithuania, you can check the information you see from lenders on the My Good Finance credit bureau, the Money Bee on the Bank of Lithuania, and the Noddle self-service website in the UK. In both countries you can also get a self-report free of charge. By the way, if you have recently moved from one country to another, your local financial institution has the right to view the report that you bring from abroad.
Let’s reduce our appetite for credit
Your credit history is not damaged by multiple credits or leases, with installments that fully match your income and payments are timely. In this place, let us remember our credit risk experts – John and John. For them, our overly-frequent, disproportionate credit appetite may be an indication of an unbalanced financial life and cash flow.
For risk experts working in financial institutions, excessive borrowing may be a sign of risk. So you may not get a loan or be asked to make a larger down payment or the like. Tip on how to give John and John more confidence in you. First of all, pay off the available credits (at least the greater part). And just after that fill out a new loan application. This will increase your chances of getting credit and reduce the likelihood that a financial institution will support you as a financial first mover.
Let’s cover overdue payments
If you come to a financial institution or fill out an online application, the financial institution will notice late payments for telecommunications, internet, and electricity services, and you are unlikely to convince the financial institution of its excellent reputation as a customer. Promptly recover faster overdue payments. By the way, the speed of debt repayment is really important.
And the explanation is simple. If you cover the delay within a few days of the delay, it is likely that risk expert John and his colleague John in London will see these delays as an indication that, although you have experienced temporary difficulties, you are making efforts and are able to resolve them promptly.
Borrowing appetite can be reduced and overdue payments can be covered. However, it is equally important to have patience. Financial institutions are well aware that financial skills and attitudes to fulfill obligations do not change overnight. It takes time to develop new skills. As a result, it will take six months, a year or more before the credit history report revision significantly raises your personal credit rating.