Whenever you apply for credit, the prospective lender will consider several factors. One of the most well-known being your credit score. This score will indicate your creditworthiness as well as the level of risk associated with approving your credit application. Many lenders also use something called a bankruptcy score to determine whether or not to approve your credit. Even if your credit is rather good, if you have a poor bankruptcy score, it can lead to your loan refusal.
Your credit score is affected when you fail to make payments on time or when you don't at least make the minimum payment each month. Even those with good credit scores can have a poor bankruptcy score if their record shows frequent use of their credit and frequent applications for new accounts and lines of credit. The more credit somebody has, the higher the risk.
Credit bureaus are privy to detailed information regarding everyone's credit behavior. This information is used to determine everyone's bankruptcy score. These details are then made available to lenders so that they are able to make an informed decision whenever somebody applies for any kind of credit. When you apply for credit, you will be required to sign an agreement that allows the lender to take a look at your financial background. This includes, but is not limited to, your credit rating and bankruptcy score.
While lenders have access to all of this information, consumers can only access limited details like their credit score. Bankruptcy scores are not available for consumers to access and this can make the credit application process even more stressful. Since they are not available for consumers to read, most consumers don't even know that this scoring method exists.
From a professional perspective, the best thing for any consumer to do is to focus on building and maintaining a healthy debt profile. Your credit approval depends on it along with a good credit score. In order to do this, you need to make your monthly payments and make sure that you don't charge too much to your credit cards. Keep your income in mind when swiping that plastic. Many experts recommend spending no more than 30% of the credit you have available. For example, if your credit card has a limit of $3,000, then you should not spend more than $900. As soon as you make a repayment, you can charge your card again but take care not to go over your 30% limit. Keep this in mind for all forms of credit, and you will be well on your way to building a positive bankruptcy score.
It's also important not to apply for too many forms of credit. The more inquiries against your name, the more it will affect your credit score. The more credit cards you have, the more it can affect your bankruptcy score. Finally, don't forget to always plan ahead in terms of your repayments. Plan your budget according to the amounts you want or have to pay on your credit cards and stick to it. Never pay less than the minimum and always use your credit cards and loans for their intended purpose. If you have too many loans or credit cards, you might need to file for a consumer proposal or bankruptcy. However, it is best to see professional, independent financial advice before you do. In addition, if you are looking for the right credit card to suit your needs, it's essential that you shop around. At Wallet Savvy, we offer detailed information and comparisons between various top credit cards. Making the best decision is all about ensuring that you are properly informed.