How to improve your credit history: effective ways

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Wishing to apply for consumer loans, customers often face a bank refusal due to bad credit history. For most borrowers, this means a negative decision in 9 out of 10 attempts to take out a loan. Those who are not going to refuse the opportunity to receive borrowed funds should know how to improve a damaged credit history.

Borrower rating: how is it formed?

After applying for a loan, managers contact the BKI - Credit Bureau. The organization collects and analyzes information about payers. All information is formed by scoring the client's activity.

Data is analyzed over a specific period of time, eg 2 years. If the payer made delays during the specified period, his rating in the BCI is reduced by several points. Information specialists of the Bureau of Credit Histories receive from all financial institutions involved in loans.

Low rating is one of the main reasons for loan refusal. Information about non-payers is stored for years: the period for updating data in the CBI takes at least 5 years. If the borrower is in dire need of finance, he should try to improve his credit history as quickly as possible.

Information in the BCI: can there be errors?

Information portals that consolidate data on payers and their relationship with the bank operate on the basis of Federal Law No. 218-FZ “On Credit Histories”. Information submitted by lenders is automatically processed and verified by the analytical department.

But even in the largest centers, for example, the "National Bureau of Credit Histories", errors periodically occur. The consequence of incorrectly transmitted information by the bank is the refusal to issue a loan to the client on the basis of a bad rating of the borrower.

Errors may be due to incorrect input of the payer's data (for example, when writing full name, age or date of birth) or a technical failure. In the first case, borrowers who are confident in their trustworthiness should apply to the BKI with an application for entering up-to-date information.

In the second case, customers do not have to worry about how to improve their credit history: the information center will transfer new information to the bank after troubleshooting.

How can I find out information about the payer rating?

With numerous refusals to obtain a loan due to poor credit history, the borrower may apply forobtaining reference information both in the CBI and in the bank.

According to Law No. 218-FZ "On Credit Histories", the borrower has the right to order an extract from one of the bureaus once a year for free. It is recommended to contact the largest centers: NBKI, Equifax, Russian Standard, United Credit Bureau.

Banks also provide information services to borrowers. For example, in Sberbank, in online banking, customers can independently order a paid statement from the CBI. The service is called "Credit History".

What does the information from the BKI include?

Before trying to get a new loan, hoping for the loy alty of a financial institution, the borrower should know what the credit history includes.

Having information from the BKI and knowing information about relationships with banks and other lenders, the payer can easily determine how to improve the credit history in Sberbank, VTB, Sovcombank and other financial institutions, for example, microfinance organizations (MFI).

The borrower's rating is made up of several indicators:

• number of active and repaid liabilities;
• amounts owed;
• late payments;
• information about early paid amounts;
• payer information (age, region of residence, gender).

How to improve a credit history if it is damaged: advice to borrowers

Based ondata on the formation of the rating, payers can improve relations with banks in six months. To increase your chances of getting a new loan, it is recommended to use the following options:

1. Repayment of existing loans.
2. Rejection of early write-off of loans.
3. Active use of a credit card as a means of payment.
4. Applying a loan for the purchase of goods "in installments".
5. Getting microloans to improve your credit history.
6. Planned increase in credit obligations.

Current and repaid loans and their impact on credit history

Information about loan agreements is the most important in the rating of the borrower. Banks, receiving data from the Credit Bureau, first of all pay attention to the number of repaid loans.

The presence of three or more active loan obligations reduces the client's solvency. All loans are taken into account, especially for large amounts: from 250,000 rubles and more.

The easiest way to improve your credit history is to get rid of existing obligations. Payment under the agreements on time will not only increase the borrower's solvency, but also allow him (if necessary) to issue a new loan on favorable terms.

Early payments: why do banks hate fast loan repayments?

Knowing how to improve your credit history when paying off existing obligations, it is not recommended to make payments ahead of schedule. Overpayment affects the change in conditionsloan agreement.

Early payments are considered to be payments made in excess of the monthly installment. Depositing funds in excess of the recommended value reduces the amount of loan debt.

Banks do not receive part of the profit from interest, so the borrower's rating is reduced. Customers who repeatedly borrow from a financial institution and repay the loan within three months of being issued will not be able to receive future approval.

The presence of 1-3 early debits for amounts not exceeding the monthly installment by more than 300% will not have a serious impact on the borrower's credit history. If the client wishes to improve his rating in the BCI, it is recommended to pay off the existing obligations without interfering with the change in the payment schedule.

Of course, early repayment when calculating points in the Credit Bureau plays a lesser role than the presence of delays, but BKI analysts do not advise abusing the bank's trust. Cases when clients applied for a mortgage loan and immediately repaid it, practically without overpaying a financial institution, deprive borrowers of the opportunity to receive a target loan from this bank by 90% in the future.

Grace period - assistant to the borrower in restoring the rating

One of the most effective and non-banal ways to improve a credit history, if it is damaged, is activity on a card with a bank limit. A credit card or debit card with an overdraft can act as an assistant. Advantages of the option - no commission andthe opportunity to receive bonuses from the issuing bank.

How does it work? When making purchases on a credit card within the grace period, the payer theoretically takes an interest-free loan. It is not necessary to spend the entire limit: it is enough to make an expense in the amount of 1000-3000 rubles within 2-5 days and pay the debt during the grace period. When making purchases even for a small amount, a new financial obligation opens up, and for the entire balance of credit funds on the card.

Payment by bank transfer is beneficial for the bank: the issuer receives a commission due to acquiring. In addition, most credit organizations encourage owners for payments through the terminal by accruing bonuses or cashback (returning a certain percentage of funds spent) to the card. Examples: "Thank you from Sberbank" bonus program, credit cards with cashback in Russian Standard and Tinkoff banks.

The disadvantage of this method is the high interest rate on credit cards. If the client did not have time to deposit all the funds spent during the grace period, he is obliged to pay the bank a commission in the amount of 19.9% to 33.9% per annum.

Installment: "hidden" loan on favorable terms

Buying household appliances, furs and mobile phones without initial capital has already become a familiar process for Russians. Mobile phone shops, shopping centers, boutiques are actively promoting the possibility of receiving goods without having money in your pocket: it is enough to arrange an installment plan to enjoy the purchase without overpayment.

Under the installment means the registration of an interest-free loan for goods. The amount of the monthly payment is set according to the promotion held in the company. For example, a visitor wants to purchase a cell phone in installments. According to the store's promotion, a loan without overpayments is provided only according to the "0-0-24" scheme, which means no interest when applying for an installment plan for 24 months (0 rubles - the first installment, 0% - the amount of the overpayment).

Companies offering to buy goods by installments cooperate with certain creditors, for example, "Cetel", "Home Credit", "OTP Bank". Stores make a profit from the sale of goods, and banks - from the commission received. The store pays the installment interest. For the client, this method is an excellent opportunity to combine a long-awaited purchase and fix the situation with loans.

But not all types of installments represent the conclusion of an interest-free loan agreement. Is it possible to improve credit history without applying for a loan in the store? Unfortunately, installments in the form of regular installments to the seller's account without a loan agreement are not a way to fix relationships with banks.

Appeal to MFIs: how microcredits are useful

Debt obligations have the greatest influence on the formation of a payer rating, so microloans are a proven way to improve your credit history.

Firstly, microfinance organizations are more loyal to borrowers. Unlike demanding banks, MFIs issue loanseven to customers with arrears and no official income.

Secondly, loans that improve credit history are issued for small amounts: from 1,000 to 10,000 rubles. This minimizes the risk of non-return of funds.

Thirdly, information from MFIs is transmitted to all Credit Bureaus. Thanks to the well-established system of data consolidation, all financial institutions that make requests to the CBI when submitting an application will learn about the increase in the client's rating. This is the fastest way to improve your credit history at Sberbank, the most demanding lender in the country. However, that's not all.

How to improve credit history with microloans?

The process of gaining a rating in the BCI using microloans consists of several stages:

• Choosing a lender. It is recommended to pay attention to companies with a minimum interest rate on loans and positive customer reviews.
• Product selection. Sometimes MFIs themselves suggest to payers how to improve their credit history by offering special types of loans.
• Filling out the questionnaire. 8 out of 10 financial institutions require contact information, income and liability information.

• Choose how to receive funds. The most popular is a transfer to a bank card, followed by online wallets, accounts, mobile phones and money transfer systems.
• Waiting for IFI decision. It is not in vain that microfinance structures position themselves as"instant loans". The average time for consideration of a loan application does not exceed 20 minutes. If approved, funds are credited to the client from 10 minutes to 24 hours.
• Loan repayment. Having received a microloan, it is recommended to repay obligations at the end of the loan term: the MFI will receive a profit from interest, and the payer will improve the credit rating.

Growth in the amount of credit obligations: what it can lead to

Clients who regularly apply for consumer loans, in 90% of cases increase the amount of obligations with each subsequent loan. This is another way to improve your credit history.

But for the approval of the amount in excess of the previous limit, the solvency of the borrower should not be in doubt with the bank. This option is only suitable for those who have been late on a loan for up to 10 days no more than 5 times.

Variety of loan products as proof of solvency

If there is a financial opportunity, it is recommended not only to increase the loan amount, but also to change the type of product. For example, instead of a regular loan, apply for a secured loan. Secured loans are approved 33% more often than other applications.

If there is no need to overpay for increasing the loan limit, as an alternative, you can order a credit card with the desired amount and use the grace period.