To the average person a ‘lender’ is a bank or other large institution that is faceless, nameless and all powerful. While it may seem that banks and other lenders are heartless (and indeed some are) it helps if you know a little about credit institutions and how they work before you go off all half-cocked trying to figure out why you can’t get a car loan with a credit score of 163.
The simple fact is, lending money is a tricky business. Let’s look at in for a moment on a much smaller scale. Say your friend Jim asks to borrow $100.00 and you say yes but as long as he pays you back by next week Friday. Now let’s say that Jim never actually pays you back because, unknown to you, Jim borrows from friends all the time and has a nasty habit of never paying them back. If you would have known that simple fact you might not have lent him the money, am I right?
It’s exactly the same for a large bank or lender. If you go to them asking for a loan they want to be sure that you’re going to pay them back. It is, after all, only fair that you do. If they were to not check your history they’d be pretty stupid, don’t you agree? If you have a clean bill of health (meaning your credit report is in good shape) they will certainly lend you some money, but if you don’t you can appreciate why if your credit history is riddled with more holes than a piece of Swiss cheese.
That’s why your credit history is so important. If you have ever owned a credit card or gotten a loan for anything (home, boat, motorcycle, lemonade stand) you have a credit history and the banks would be crazy not to use that history to see if you will pay back the money they are thinking about lending you. It only makes good business sense, and that’s why you should protect your history by always making sure you pay bills on time.
Credit reporting agencies were formed for this very reason, to give lenders the knowledge that they need to make important business decisions like lending you money for a home or car. If they see that you credit report is strong they will lend to you. If it’s not great (but not a complete mess) they may still lend to you but at higher interest rates. Again it only makes good business sense for them to do this because there’s a risk that you might not pay them back.
So make sure to take care of you credit your entire life. It can and will affect you in many ways even if you don’t like it. If you do take care of your credit history you’ll also find that banks are very happy to lend to you for whatever reason you give them