Bad credit history is also known as non-status history. It is a negative credit rating given to an account holder on the basis of his credit scoring. It is not desirable for those who need money or capital on loan to have a negative mark on their credit score. Typically a lender goes through the account information of a person in detail to decide whether the applied loan should be approved or not. This includes credit limits, balances, payment history etc and that`s when having a poor credit history could be very harmful.
Credit scoring was brought into being to make it easier for lenders to ascertain the terms upon which a loan or credit card application may be approved. It also allowed more consumers to get such benefits. It involves marks that are normally dependent on statistical analysis of the consumer`s credit history when pitted against other debtors.
A lender investigates very thoroughly whether an account holder should be credited finances or not. Consumers having a history of bad credit invite trouble in this area especially if they have been consistent in maintaining a poor score. The consumer`s earlier capability in paying bills on time, the amount of outstanding credit against the money owed and the duration of the credit are all contributing factors in attaining an impaired credit history.
Bad credit history is known to be one of the most important reasons why a loan is declined. Keeping sight on the amount of money borrowed by an account holder and also his/her repayment history; lenders take the past record of a consumer very seriously. Reportedly, it is also a good pointer in helping determine the intent of the credit card holder, especially whether or not they are in a financially difficult situation. Being able to judge the motive of a potential borrower, it also enables a bank to make their lending decision in an efficient manner.
For future benefits from a bank or lender, it is best to stay as far from having a bad credit history as possible. Some steps that can be adopted to make your credit score better are paying your bills on time and avoiding late payments, keeping away from bankruptcy and lowering not just the number of credit cards, but also reducing your credit limit amount on your cards. Consumers must also get their credit report on a yearly basis to spot errors if any on the lender`s part. To re-establish credit, consumers can further request a family member to sign jointly on a loan or credit card having a small limit.
All in all, banks and lenders take into account a number of factors before a loan is authorized and bad credit history stands out as the most important one among all reasons cited for denial. Above everything, a lender must be able to gauge that there is minimum risk involved in crediting an account holder with the desired amount. Maintaining a good repayment history and also stating very clearly the intentions involved in gaining credit goes a long way in building a good reputation with the bank.