What does it mean for a borrower?
Although the main focus from COVID-19 goes to health, financial aspects follow closely after. Many households have been affected financially all over the globe. A lot of people before COVID-19 was living from paycheck to paycheck already. So after getting smaller pay or losing the job altogether, automatically translates as unavailability to repay their bills on time or in general. Which leads us to credit score and how unpaid bills can change lender and borrower compatibility.
What factors lenders take in counter before accepting your application and what solutions you have for your credit score and how to work on it, to find out keep on reading.
Process Of Approval and High/Low-Interest Rates
As lenders are aware of the current state of the world, they know that they have to be extra cautious to whom they provide a loan. As there is a potential for the borrower to not repay on time, it can cause issues for company and individual.
Lenders will pay extra attention to clients credit reports now as it reflects on recent payment activities or a lack of them, which indicates clients availability of repayment up to date.
Lenders will offer:
- Lower interest rates to clients who are low-risk borrowers
- And higher interest rates to clients who have the probability of not repaying.
That way, there is a possibility to have fewer losses for a lender and individual in the future.
Most Efficient Jobs For Stable Credit Score
The main factor for keeping your credit score stable is to have a permanent ongoing job. We understand that it’s not ideal for a lot of people -, however, it is a key to keep your credit score up.
Jobs that can provide you with security in the future are:
- Public sector
- Technology businesses etc.
But it is essential to check your credit report either way as you can catch a fraud like actions on your behalf. In future, after COVID-19 passes, try to combine your job, workplace in a way that it can benefit you in the future in case something like this happens again, you’ll be ready without a worry.
Contact Lender and Pay What You Can!
If you know that you will not be able to repay on time or at all, contact the lender and let them know your circumstances, which should lead you to various options and the best conclusion for you in this unpleasant situation.
Pay what you can to the lender, even the smallest amount, will be better than none in a long-run perspective for your credit score. Worth to mention, your credit score doesn’t reflect on you as a borrower because of the unexpected job loss. Most lenders will recognise your situation and will try to help with their best intentions. Your credit reports will show if you have been good repayer or not in the past before the current events accrued.
If you contact the lender, there can be an option for you to skip the payments for month or two -, however, the interest rate will grow with it as well. It’s a great option to extend the repayment period, but you need to be 100% sure that you will be able to repay the extra money before applying for this option.
Summary Of Credit Scoring
At this time credit scoring can be tricky,- it can mean a lot and nothing at the current events. What we mean by it is, applying for loans can be beneficial for low-risk borrowers rather than high risk, which should be self-explanatory, to stay safe financially. Even though people with high-risk most likely will be in higher need of a loan than low-risk. Keep it in mind when applying for a loan, in which position you are sitting in and what chances you have to get approved.
Changing your credit scoring isn’t hard. All you need to do is to be efficient with the dates and amounts you have to repay. That way, you will build your credit score back up. As we mentioned before, lenders will pay attention to your recent payment history from credit reports, more than further back history as it is not relevant to your current financial state and repayment schedule.
To learn more tips about your finances and how to save money check out our blog for more!