Common Myths about Bad Credit
Myths about Bad Credit which are common for Loans
I’ve never borrowed therefore I can’t have a bad credit history
This is not true. Many people think that because they have no borrowing history and have never been in any type of debt that they automatically have a good credit rating. This is incorrect. A persons credit score is built up by a combination of data reporting on borrowing history, this gives potential lenders information on how likely the person is to stick to their credit agreement and repay the finance lent to them. Therefore in order to gain a good credit score borrowing needs to take place.
For someone with no credit history the best idea would be to ensure that they sign up with one of the various credit reference websites (such as checkmyfile) and to make sure that all of the information held, such as address is correct. The credit reference agencies refer to the electoral role for an individual’s current address, therefore it is important to get on the electoral role. Once this has been achieved the quickest way to improve a bad credit rating is to apply for a credit card with a low balance. Many credit card companies offer credit cards with low balances of around £250 for those with a bad status rating. Using this to make purchases and paying of the balance each month can help to build up an otherwise bad credit rating. Likewise it is important to note that failing to repay this credit card will have the opposite effect on your credit rating, therefore it is crucial to ensure that the balance is paid off each month.
I Can’t Repair My Bad Credit History Unless I Clear My Debt
Not quite true. The way to improve a bad status rating is to make sure that existing debts are repaid on time each month. Missing repayments and being late with repayments is what effects a credit score the most.
I have lots of existing debts, therefore I have a bad credit history
Quite the opposite! If repayments on existing debts are being repaid on time each month it is very likely that the credit score held on the credit file is good. The way to maintain this good credit score is to keep on paying each month as failure to do so will result in a negative impact on a credit rating.
I won’t be approved for a loan as I’ve already been declined because of bad credit
As there are many borrowers that do have a bad status rating due to bad credit in the past or because of a few late payments there has been an influx of lenders that are willing to accept applications from those with a bad credit history. Why? Because there is a big market of potential borrowers that can actually afford the repayments on a loan, some lenders have identified this and have re written their acceptance criteria. The key is to choose your lender wisely. Applying with your high street lender or your bank and being declined will worsen a bad credit rating.
The only drawback with ‘bad credit loans‘ is that they come with higher interest rates and in some cases longer terms. A reputable lender specialising in loans for those with bad status needs to determine how likely you are to repay the loan and does this taking other factors into account such as status – whether you’re a homeowner or not – and your monthly income.