Your credit rating is a rating based on how you have behave with your previous loans. Both good information and bad information will be recorded on your credit rating and it is the points that are allocated to each of these events that create a numerical score, that banks use to judge you.
Let's say, if you have constantly taken out loans and paid them off in full every time, on time, then your credit rating will be good and the credit rating will affect this.
On the other hand, if your previous loans have suffered plenty of missed and late payments and the credit companies have had to chase you for payments, or worse still they have had to write off a few of the loan because you have not kept up with payments, then your credit rating, and therefore your credit rating, will reflect this as a warning to building societies that you are not a good credit risk.
So the credit score becomes an indicator of how overall you have performed with loans in the past. Your possible mortgage bank looks at this score to get an idea of whether you have been good with cash or not so good.
If the credit score looks favourable, they will assume that because you have behaved well with your finances previously then you are possibly trusted with their money and this makes them more willing to lend you the cash. Conversly, a poor score indicates failure to repay loans and this will be a warning to them that you might be a difficult customer to get all of the cash back from in the future.
So the first effect of a credit rating is how willing they will be to lend you money. Of course, this is not the only attribute they are going to take into account. If you are able to put down a huge deposit, say you are only asking for 25% of the property's value, then even with a lower than perfect credit rating they will more than likely be happy to deal with you. But if you need a 95% mortgage, then your credit rating is going to need to be nice-looking good.
The other affect that your rating has is on the actual interest rate that you will be offered for your future mortgage. Assuming that you are made an offer, just those applicants with the best rating and the highest deposits will get the best rates that the building society has on offer. For those with lower deposits and worse credit histories, the offered interest rates could be lots higher. So your score might end up costing you more with your mortgage.
This is why before applying for a mortgage it is well worth applying to see your credit rating and checking that everything is correct. Be sure that that there are no errors and that, equally importantly, there are no pieces of positive information not there, for example paid off loans.
![[Valid RSS feed]](http://article2008.com/images/feed-icon.png "XML Feed For RSS"){kind=icon}
![[Valid RSS feed]](http://article2008.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites