People take out credit for a whole host of different reasons – whether it’s a mortgage to buy your first home, a credit card to cover unexpected expenses, or a personal loan to make a major purchase or consolidate your existing debts, credit can help to bridge a financial gap.
However, when it comes to loans and other financial products, if you’ve had credit problems in the past, you might find that it’s difficult to access credit when you need it.
If you have missed repayments in the past, or have a County Court Judgement, or bankruptcy against your name, you might be considered to have poor credit.
If you have poor credit, you won’t usually be able to apply for the best loans on the market as those with the most attractive terms and rates are typically reserved for borrowers with good credit histories.
However, although your credit options will be more limited, it’s not to say that you won’t be able to access finance at all – there are a number of options available, including so called bad credit loans
The term poor credit loan refers to a loan that has been designed with the unique needs and requirements of people with a poor credit history in mind. Poor credit loans are similar to other personal or secure loans, but more expensive. Bad credit loans can allow those with poor credit to borrow money, often offering a financial lifeline when it comes to covering a major purchase or consolidating other debts.
In addition to this, a poor credit loan can actually help you to repair your credit history, allowing you to prove to potential lenders that you can make payments on time and manage your money responsibly. Of course, like any loan or form of finance, if you’re considering taking out a poor credit loan, it’s important that you ensure you can make your repayments on time.
It’s also important to consider the interest rate, as this type of loan often comes with substantially higher interest rates than other loans. This is because applicants with bad credit tend to pose a higher risk to lenders. The greater the risk you are perceived to be by the prospective lender, the more interest you can expect to pay and the more borrowing restrictions you will usually face.
A credit score is a numerical rating that demonstrates how you manage your finances, giving lenders an indication of whether or not you’ll pay back the money they potentially lend you.
There are three main credit reference agencies – CallCredit, Equifax, and Experian – who all keep a version of your credit file. Your report contains information about your financial history, including any mortgages, loans, and credit cards you’ve taken out, including information taken from the electoral roll, court records, search, address, and linked data, and account data.
As almost all lenders check your credit record when you apply for a loan, your credit score can affect your ability to borrow money or access financial products such as loans or credit cards. Lenders use the information contained in your credit file to decide whether or not they are prepared to lend to you, how much they will let you borrow, and how much interest they will charge you.
If you’ve got a good credit rating, you will have more choice and access to cheaper loan rates, whilst if you have bad credit you can expect less choice and to pay more to borrow money. If you’ve never had credit before, you may also struggle to access the best deals as you have no track record for lenders to base their decision on.
With this in mind, it’s well worth taking the time to check your credit score. There are plenty of sites out there that will allow you to check your credit score for free and help you to improve it if necessary.
There are a whole host of reasons why you might have a bad credit rating. Anything from failing to keep up with payments on a credit agreement or having a County Court Judgement against you, through to never having a loan or credit card, can result in a bad credit rating.
In addition to this, if you’ve never taken out any credit before, you will also probably find that you have a bad credit score and may find it difficult to secure credit. This is because, without any sort of credit record, good or bad, lenders will find it difficult to assess how worthy you are of credit.