Maricor Bunal
Credit score is a crucial factor that affects whether loan providers approve your application or not. Although we don’t have a standardized credit scoring system here in the Philippines yet, providers have a specific checklist to assess your credit score against.
Specifically, the following are the five aspects they’ll look closely:
1. Payment History
The payment history component of your score helps providers determine whether you’re a responsible borrower who’ll make payments on time, consistently. This aspect covers these sub-factors:
a. On time payments of each account on your report.
b. Records of late payments. Have you ever made late payments? If you have, how delayed were you in paying – 1 month, 2 months or 3 months? The later you pay, the worse your score will be.
c. History of foreclosures, suits, liens and debt settlements.
2. Types of Credit
Not all loans and credits are liabilities because there are those that can help you acquire assets and build wealth. For instance, business credit lines and home loans are considered good debts because these will help you increase assets list. On the other hand, emergency loans and personal credits are tagged as plain payables because these won’t earn any revenue for you.
3. Age of Accounts
Credit reviewers will also consider how long you’ve been having each account. A long-term account is good if it is not flawed with late payments. Short accounts are also fine, especially if it’s because you’ve paid on time.
4. Loaned Amount
Lenders would also want to see how much you’ve owed in all your accounts and whether you’ve been paying them regularly. Reviewers also like to see if you’ve owed a variety of credit types and whether or not you’ve managed your payments efficiently. They would want to know if you’re financially stable and responsible enough in making the necessary installments and even goes beyond the fixed monthly payables.
5. New Credit
Financial providers will also consider the new accounts you’ve applied for and opened. If you have multiple accounts opened, they might assume that you have cash flow issues, hence you could post a credit risk for them. However, your new credits won’t go against your score if you can prove that you can handle your payments by showing your income streams.
Credit score assessment is one of the ways financial providers determine how responsible you are in paying your dues. And this applies in almost all types of loans that you’re aiming for, be it a home loan, business line of credit and auto loan.
