Bad Credit and Loans: Everything you Need to Know
In an ideal world, we’d pay all our bills on time, loan payments would be a breeze and our credit rating would be squeaky clean. In the real world, things aren’t so easy. But our credit scores are being checked more and more so it’s important to know what it’s all about, and what to do if you have bad credit.
What’s a credit score?
Credit scores are designed to let lenders know the likelihood of a borrower repaying a loan. It’s a number between 0 – 100 which uses past behaviour to represent how financially reliable you are.
How it’s calculated
Both positive and negative financial history in your credit file contribute to your credit score. Put simply, any timely loan payments improve your credit score and any missed payments decrease your credit score. Your final credit score is a combination of a number of factors including:
- Late payments, including any defaults
- Any requests of your credit report in the last 5 years
- Your monthly repayment history or any credit cards, loans, mortgages, hire purchases
- Payment history for other expenses including power and gas bills, phone accounts
- How active your accounts have been including any personal loans, study loans, mortgages and car loans
- Any court judgments against you in regards to outstanding debts and bankruptcies
What your credit score might affect
Your chances of getting a loan approved, and amount you can borrow.
The better your credit score, the higher chances your loan will be approved and the more you’ll be able to borrow. At The Lending People, your credit isn’t the only factor in your application – we also look at factors like affordability, account conduct and job stability.
Your interest rate.
The better your credit, the lower your interest rate will be. This is because of the increased risk for lenders when borrowers have bad credit.
How to check your credit score
There are 3 credit agencies where you can request a free credit history report:
How to improve your credit score
It’s not possible to improve your credit overnight, but there are a few tips to help over time:
Pay your bills and repayments on time
this is essential to maintain a good credit score
Don’t get application happy
each time you apply for finance, your credit gets checked. Too many enquiries will have a negative impact on your credit score.
Keep credit card debt low
If you have the will power, you are better off keeping credit cards and keeping the balance low, which will improve your credit
What if I have bad credit and need a loan?
Here at The Lending People we have some of the most flexible lending criteria in the country. We look at all the positives of your application – like stable income, and ability to afford repayments. If you have bad credit, we still might be able to help with a loan. Apply now, or chat online with any questions.