Been refused for a loan because of bad credit?
If you have recently applied for a loan and been declined, this is most likely because of a bad credit rating. Your bad credit rating could be due to a number of reasons including, not being on the electoral role, not having any borrowing history, or missed / late payments on previous borrowings.
Credit reference agencies gather information to create a credit score that is shared by lenders. Lenders access this by doing a credit check when you apply to borrow money from them. This also applies to other kinds of financial contracts such as mobile phones and hire purchase. This credit score gives lenders an insight on whether you are a high or low risk borrower, the lower the risk, the more likely they are to lend to you.
Let’s assume for this article that your bad credit rating is not due to a bad borrowing history, but due to not having any borrowing history. In order to boost your credit rating there are steps that you need to take to put yourself on the right path to a good credit rating, which will mean that you are more likely to secure finance when needed.
- Register on the electoral role. Not being on the electoral role indicates that you do not have a permanent residency, being registered proves that you have stability.
- Pay your bills on time. Set up a direct debit for all bills so you are never in danger of being late with your payment.
- Apply for a credit card. There are many credit card products that cater for those with a bad credit rating, these come at high interest rates with lower spending amounts. Using a credit card of this nature and paying off the balance in full every month can have great potential in improving your credit rating. Please be warned – it is important that you pay off the credit card balance in full every month, otherwise you will be hit by high interest costs, costs that can soon spiral out of control and have a serious impact on your credit rating.