The health of your credit becomes a very important factor in your personal finances. Bad debts, late payment, non payment of monthly instalment etc. comes into play as far as your credit score is concerned.
The general guidelines about how your credit score is compiled are broken down into five main categories, with the following percentage weight for each:
- 35% payment history (only for payments later than 30 days)
- 30% debt-to-credit ratio
- 15% length of credit history
- 10% new credit
- 10% type of credit in use
A credit rating will then be assigned on the data collated:
- Rating A – applicant automatic qualify for loan applied
- Rating B – loan can be considered
- Rating C – application will be rejected but borrower can appeal to bank
- Rating D – loan will be rejected and is final
If applicants don’t qualify instantly, chances are a higher interest rate would be imposed on them, or less credit will be offered with a shorter repayment period.