Good borrowing score remains a precious attainment. Those having FICO rate above 740 gain access to the most lucrative credit cards with low interest rates on mortgage and auto loans. But when we aim to reach that level without knowing how a borrowing rate is formed and what influences it, we tend to make elephants from fleas and do a lot of mistakes. These mistakes can cost us a lot, from higher interest on a loan to even disability of receiving a good credit rate for the next couple of years. If you don’t want this to happen, you’d better know about 4 popular myths about borrowing rates.
- I should borrow more to improve my rate faster: Who’ve ever told you that the more owners borrow, the higher stays their score? Borrowing rate formalizes the level of bankers’ trust in clients’ history. Whom they trust more are those who repay debts on time. It is known that a plastic debt can damage a score much more than a huge long-term loan. And if you pay your balances in full on a monthly basis, you will compensate zero interest and increase your access to loans the same time;
- If I have low borrowing score, I cannot apply for a credit card: Lending options exist even for people with rate below 500. If yours is not that high, you are able to apply for Top 4 Secured Credit Cards to Rebuild Bad Credit and improve FICO score in a year. The two things you should do is to pay balances in time and manage expenditures so as to not get below the limit;
- I will never become eligible for a loan because my earnings are low: Unless you don’t apply for premium plastics with refunds and bonuses, you don’t need to earn much. Bank doesn’t know information about your income, the only thing it considers is your borrowing rate, which shows your financial discipline. Unless you don’t procrastinate with payments, you are eligible for any loan;
- I already know my score: Some people get very angry when bank rejects their application because, by estimates of their scoring agency, their estimate is lower than 740. There is no monopoly in credit score agencies and your bank may use the one, which you may even not know. So, your best strategy is to ask for a loan when your FICO score reaches 750-760.
When accepting or rejecting loan or credit plastic applications, banks consider neither your earnings nor the number of your applications. But what they care about is the way how you pay your balances and your attention to debt repayment.
If you are a disciplined borrower, you will be more eligible for a loan than a person, who doesn’t care about paying balances. Remember that and don’t put dramatic value on things which don’t matter much.