Category: Credit Scoring

Will Borrowing Improve my Credit Score?

There are lots of people that have concerns about their credit score. It is wise to make sure that you are familiar with the idea of credit scores and what it means because it could have an impact on your future. If you apply for a loan, insurance or to rent a property or even for a job, your credit record will be examined. Often your financial history will be scrutinised and this is because often the person looking wants to see whether they can trust you. They will want to judge whether you are capable of making regular payments or repayments. Some people will want to do what they can to be able to improve their credit record so that they look better when people like this come along and make judgements. Some people think that borrowing will help them but it is worth making sure that you really will benefit from this before you have a go.

Borrowing Can Prove Repayments

The fact that you have borrowed money and are making the repayments can show that you are capable of making regular payments. This can be impressive to those that are looking for proof that they will be able to trust you to make the payments that they need when you are repaying them or paying for the services that they are providing. It is a good idea to think about whether they will need this proof though. Take a look at your credit record and if you already have evidence of regular payments, perhaps such as utility bills, for example, then this might be enough, without you having to take on a loan. This is because there are risks associated with doing this and you need to make sure that you are careful and that you are aware of the risks that you are taking on.

Risk of Missing Payments

There is always a risk that you will miss a repayment for some reason. This could be for all sorts of reasons, perhaps if you have an extra expensive month, an expected bill or less money coming in. You may even just forget to make the payment. Whatever the reason, it is important to make sure that you do not miss any payments at all or else it will actually defeat the purpose of taking out the loan because it will make your credit record look worse than it did before. Therefore, you will need to carefully check how much the repayments will be and work out whether you feel that it will be able to repay it confidently when you need to.

Borrowing is Expensive

There is a cost associated with all borrowing. You may have to pay interest or fees or both and this means that you will have to pay out for the loan. It is a good idea to find out how much it will cost you in total and then you can decide whether you think that it will give you good value for money or whether you feel that it is too expensive to be worth it.

People May Not Like that You Have Borrowed

There is also a risk that people might not like that you have borrowed money. They might see it as an indication that you are desperate for money or not managing your money well and so it could actually make your credit report look worse. It is hard to know what people are looking for and so trying to guess could be risky. It is made extra difficult by the fact that different people are looking for different things and they do not tell what it is that they are looking for and so you just have to hope that you are doing the right thing.