Credit Score Expert to help...

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belike14

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Hi,

I would like some advise when it comes to credit scores.

I had a score below 700 for many years but for the past 2 years I opened numerous ''micro loan/short term loans'',sometimes it will be open for 30/60/90 days then I will pay it up.My last one was taken out in December 2017 and paid up in January 2018 (since then I did not apply for any accounts),my score is now very low around 598.I want to apply for a home loan in the next 6 month but I need to know how am I going to get my score up to at least 640.I have never skipped any payments on any account nor do I have any defaults or judgements.I have a credit card,jet account, MTN contract and 2 personal loans,should I close the 2 personal loans or should I pay them half?My affordability is on point for a home loan but it's only my score that's very low.I need to know how to get my score up ASAP.

Please assist.
 
Paying off a personal loan will increase your affordability and provide a better application for your home loan.
Also staying away from micro loans for the next few months should normalise your score a bit.
 
I will never take out a micro loan again.But if I pay off my Personal loans and close them,won't my credit rating go down?
 
Opening multiple micro/short term loans is viewed as very bad because it implies that you are not managing your cashflow which is why your score has gone down. I don't know the exact scorecard for the score that you are talking about but that could impact your score for a few months up to a few years. Your best approach to improving your score would be to pay off the personal loans, close the jet account. Then pay off your credit card in full every month. It will take a while for your score to improve though because it does look at behaviour over a time period (depending on the scorecard, I have seen anywhere from 3 months to 2 years).
 
Do you perhaps know what score banks look at when applying for home loans?
 
belike14 said:
I will never take out a micro loan again.But if I pay off my Personal loans and close them,won't my credit rating go down?
Click to expand...

No, having more credit is generally not positive for your score.
 
belike14 said:
Do you perhaps know what score banks look at when applying for home loans?
Click to expand...

Depends on the bank. All of them have their own internal scorecards but they usually consider bureau scores as well. Either as part of their scorecard or as a separate factor. E.g. the bank I work for includes one of the bureau scores into our own scorecard.
 
Credit Bureau[/QUOTE]

How does the banks work with their own internal score card?
 
Same way that the credit bureau does. It's a scorecard that takes in various factors and assigns scores to different values within each factor which are then added up to get a final score. The scores between different scorecards are usually not directly comparable.

For example a factor could be "number of credit exposures" and the scores could be 52 if =none, 109 if =1 or 2, 75 if =3 and 30 if >3. So each person would have a score per factor and all the factor scores are added up to get the overall score.

The actual score ranges are decided by whoever builds the scorecard so there isn't really a lot of consistency across the industry. I've see ranges all over the place e.g. 1-5, 1-21, 400-800, 1-900 etc.

From a bank's internal perspective, they will have a lower score limit that they will not lend below e.g. no lend if score < 480. And then the pricing would decrease as the score improves (although for home loans its usually tied to the LTV as well).
 
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