In Nigeria, the term “credit score” isn’t commonly used in everyday conversation. However, the word is frequently used in other nations and in particular situations where a bank loan is sought.
This post will look at what a credit score is, how it works, and how it influences your loan application.
What Does a Credit Score Represent?
A credit score is a three-digit figure ranging from 300 to 850 and shows the risk involved in extending credit or a loan to a potential borrower or customer.
The smaller the credit loan, the higher the risk, indicating that the consumer is likely to default on payment and vice versa. The results are categorized as exceptional, good, ordinary, or poor.
A credit score represents a measure of an individual’s creditworthiness. Before we go into the major ways of improving your credit score in Nigeria, let’s walk through some adverse effects of low credit score:
- Higher chances of being turned down for loans and lines of credit.
- Landlords are less likely to approve your rental application.
- When relocating to a new apartment, you may be required to put down security deposits for utilities.
An employment background check may cause you some difficulties if you’re looking for work.
They may not be capable of seeing your credit score, but they will have access to the information that led to your bad credit. It’s possible that you’ll have to pay a higher insurance premium.
Improving Your Credit Score to Increase Your Chances of Securing Better Loans in Nigeria
The good news is that credit ratings do not remain constant over time. When your credit report is updated, your credit score is updated as well.
That means your bad credit score can be “cured” if you take the prescribed meds regularly. Are you well prepared to make the right decisions that will improve your credit score? Here are sure-fire techniques to raise credit scores and the benefits that accompany them:
Always pay your payments on time
If you pay up your debt late, no plan for improving your credit score will fall through. Worse, delayed payments can be reported to the bureaus for about 700 years.
If you delay payment by about 25 days, contact the creditor immediately. Pay as soon as you are able to and ask your creditor if the delay in payment will be reported to the appropriate credit bureau.
Even in situations where your potential creditor refuses, it’s worth making the account current on time. For every 30 days that an account is registered as late reduces your credit score.
Errors in credit reports should be challenged
An individual’s credit score can be lowered, given the mistake on the individual’s credit reports. One can immediately improve your credit by simply disputing credit report inaccuracies.
Every of the main credit bureaus is needed to grant you a report. Request them from AnnualCreditReport.com, and cross-check for all kinds of errors like delayed payments when you actually made payment on time, someone’s credit activity coupled with yours, or undesirable information that hasn’t been listed for a while. After you’ve seen the inaccuracies, you should try to fix them
What is the impact of this technique? Well this varies but can be crucial in a situation where a creditor actively reports you as having delayed on a payment when you haven’t.
Requesting and reading your free credit reports, preparing complaints regarding mistakes, and tracking the follow-up takes time.
But it’s worth it, especially if you’re trying to actively improve your credit before a major milestone like qualifying for a huge loan. Credit reporting agencies have up to 25 days to respond and investigate.
Some organizations claim to be capable of swiftly correcting problems and boosting your credit but approach with caution.
Deal with accounts that need to be collected
Paying off your collection account eliminates the dangers of being sued for incurring debt, and you might be capable of persuading the collection agency to hold off on reporting the debt once you’ve paid it off. If your credit reports are inaccurate, you could also erase collections accounts.
What could possibly be the effect of this technique? A collection account is a black mark on an individual’s credit report, so it might be really beneficial if the collector makes a decision to put a stop to reporting the account.
Request and examine your credit score reports, then come up with a strategy for dealing with collections accounts.
On the credit scores that overlook collections that are paid, such as newer FICOs and VantageScore the paid-off state can help your ratings as soon as it is submitted to different credit agencies.
Fresh Credit Requests Should Be Limited
If you want to concentrate on improving your Score, you should put off applying for new credit for a while. When a lender checks your credit to confirm if you qualify for a loan, this is known as a hard inquiry.
These checks get registered on your credit report, and each review has the potential to lower your credit score. When you try to borrow money from numerous sources, the credit score may be affected because lenders tend to see you as a higher credit risk.
Of course, you don’t have to be Sherlock Holmes to figure this out. New hard inquiries should be avoided like the plague until the credit score has improved.
Soft inquiries are made when you check your credit score or a card issuer/lender runs a check to preapprove individuals for a financial product. These reviews have no bearing on your credit score.
If you want to apply for a large loan, qualify for the finest rewards cards, or get better interest rates, you’ll need to improve your credit score. It’s important to remember that apparent improvements or repercussions on your Score may take a few weeks or months. Keep these habits going for as long as it takes, and you’ll be glad you did! The sooner you begin attempting to improve your bad credit score, the better.