If you have poor credit, you might think that your chances of obtaining a loan are zero. Many decades ago, if you had a steady income and assets that were substantial you could arrange a meeting with your bank manager and get a loan. Today people tend not to go to the bank to request a loan. Instead, they look online and rely on their credit rating to impress lenders. Sadly, if your credit rating is poor you might find yourself turned down by countless lenders. There are ways however to improve your chances of obtaining loans for poor credit.
What Defines Your Credit Rating?
Your credit rating can really be traced back to the time you signed up to vote on the electoral roll. Being on the role is good for your credit rating. The information builds up as you start your first job, open a bank account, and have your salary paid into it. It continues to flourish as you apply for a credit card or loan and repay on time.
Troubles may start if for some reason you fall behind on repayments or worse still find yourself unable to repay the loan. Black marks start to appear on your rating and it goes downhill. What is not shown on your credit rating is the good side. You work hard you have an income coming in and a bank account with a little money in it. Yet these do not count on your credit file.
Problems for Younger People and Credit Ratings
Younger people can also be said to have a bad credit rating simply because they do not possess a credit rating. They cannot have a credit rating as such if they have never borrowed before. However, they may find that when they apply for a personal loan or credit card they are turned down. They then enter into a vicious circle.
Credit Defaults Affect Your Chances of Borrowing
Millions of people in the UK suffer from a lack of understanding in regards to their credit file. Many do not realise why they have a bad credit rating. You might have had loans in the past and repaid on time, however, your credit rating may be affected by defaults; these are often caused by small amounts of money being paid late or missed. For instance, defaults can occur through:
- Being late paying a bill;
- Late paying the credit card even if you paid off the full amount;
- Moved house and missed a “failure to pay” letter so the bill went unpaid;
- Accidentally canceling a direct debit and the payment was late;
- Forgotten to set up a new direct debit if you changed your bank account;
- Never received a bill as it went missing in the post and you failed to pay a bill on time.
Any of the above circumstances can affect your credit file; you do not get a poor credit score just because you found you could not repay the loan or credit card. You can get one due to silly misunderstandings and forgetfulness about tiny sums of money.
Financial Companies Can Make Mistakes Too
A bad credit rating can also come around due to financial companies making mistakes, which affect your credit file.
Human beings do not handle the credit system it is automated. It works based on data sharing from agencies. If a finance company makes a mistake and has you down as owing a payment when in fact you paid, it affects your credit rating. There is no one to see this mistake, apart from you. If you have not checked your credit file, you will not know anything about this mistake.
Are There any CCJs on Your Credit File?
You might have missed a repayment many years ago or still have accounts on file that you no longer use. Check for any CCJs on your account and if they have been on your file for more than 6 years have them removed. A CCJ is a county court judgement given through the courts if a creditor takes you to court for not paying.
Therefore, to improve your credit rating you might want to check it yourself to determine if any mistakes were made that could be stopping you from obtaining credit. One way of achieving this is to check your score free at ClearScore.
What to Do If You Find an Error on Your Credit File
If you find an error on your credit file, such as a payment that is outstanding but you know you paid it, you can do something about it to get it removed.
Consumers do have a right to have any data on their credit file corrected. If you find an error, first contact the person associated with the error, your credit card company, gas or electricity supplier etc. If the error is not corrected you can take the matter up with the ICO and make a complaint. They will examine it for you.
More Ways to Improve Your Credit File
Here are some more ways to improve your credit file:
- Always pay your bills on time. This includes bills to such as mobile phone contracts, utility bills and any subscriptions you signed up for and paid for online;
- If you are not on the electoral loan register to vote;
- If you have credit cards or other loans make sure you pay the repayments well ahead of time;
- If you have a credit card do not spend right up to the limit on your credit card;
- Don’t keep applying for credit if you have been turned down as this is registered on your credit file;
- Keep your personal details safe so that you do not become a victim of identity theft, which affects your credit file;
- If you have a poor credit history because you have never taken out credit, take out small loans and repay them on time and in full to build up your credit rating;
- Consider whether you are linked with another person financially. If that person, usually a partner or someone you stood as guarantor for, has bad credit, this could affect your score.
Obtaining Loans for Poor Credit
If you do have a poor credit score you still might be able to get a loan. We work with a panel of lenders who will look at your credit file but also take into account your present circumstances.
This means that providing you are over 18, have a regular income, a bank account, debit card and can set up a direct debit, you will be considered for a loan regardless of your credit score. The lenders we work with now that mistakes can be made and your past should not necessarily affect your future.
There are different loans available and the most suitable is going to depend on the amount you want to borrow, and how long you want to repay the loan.
Do You Need Just a Small Cash Sum
If you need a small loan to cover any unexpected financial emergency you might want to look into applying for a payday loan or quick loan as they are sometimes called.
The loan gets its name as it is usually paid back in full, with interest, on your next payday. There are lenders who may extend this for up to three months, depending on the amount you borrow. With the payday loan, you can expect to borrow in the region of between £100 and £500, or more, depending on the lender.
Payday loans may be suitable in any instance where you find you have to get your hands on money fast. For instance, you might have forgotten about a bill that needs paying or need money to fix your car.
Do You Have Someone to Stand as Guarantor?
Depending on how bad your credit rating is might depend on whether the only option open to you is a guarantor loan.
A guarantor loan is generally easier to get approval for if you have a bad credit rating. When considering this type of loan you do have to bear in mind you need someone with a respectable credit score to stand as the guarantor.
That person will be there to sign on the dotted line with you to say they will take on the responsibility of the loan repayments if you should fail. Younger people typically take out guarantor loans and their parents stand as the guarantor but anyone of any age can apply for this type of loan.
A Short-term Loan Repaid Over a Short Time Frame
If you need to borrow more than a payday loan allows, and want to spread the cost over up to a year or so a short-term loan may be suitable.
The short-term loan may allow you to borrow up to £1,000 or so, depending on the lender, and repay it back for up to a year. This again will depend on the lender.
When considering a short-term loan you do have to keep in mind that interest is put onto the loan and the longer you take the loan over the more interest it is going to accumulate. When comparing loans with the lenders we work with check the APR. The APR is the annual percentage rate, the higher this is, the more interest is calculated on the loan. Go for the lowest APR possible if you have several loans to choose between.
Spread the Loan Repayments For Up To 36 Months with a Personal Loan
If you want to borrow a larger sum of money, up to £5,000 and spread the cost of the repayments over a longer period, usually around 36 months, you might consider a personal loan.
Generally, personal loans are unsecured loans, which mean you do not have to secure anything against the money you are borrowing. The personal loan comes with either a fixed rate of interest or a flexible one.
The fixed rate of interest is preferable, as you know exactly how much the total amount of the loan is going to be, including interest. The rate of interest is set at the time of taking out the loan and it will not vary, even if the Bank of England interest rate does.
There is the disadvantage with the fixed interest rate in that if the Bank of England interest rate goes down, you would still be paying the higher rate. Of course, if the rate goes up you are benefiting, as the rate you pay is still the lower one that you signed up for when taking out the loan.
How We Can Help You Get a Suitable Loan
One of the things that can affect your credit rating negatively is continually applying for credit. If you need a loan, you can get into a vicious circle or applying, being turned down and re-applying with a different lender. These applications can be noted on your credit file.
We can help you obtain a loan with one application and search with numerous lenders. If one lender turns you down, we move onto the next out of our wide range of lenders.
A poor credit rating does not necessarily imply that you cannot get a loan. However, it does cut down your chances and can make life extremely difficult.
Checking your credit file to find out if mistakes have been made on your credit file and have them amended is the first step towards improving your rating. If you want to apply for loans for poor credit let us help to match you up with one of our lenders. Our lenders offer competitive rates and numerous loan options and you could have a decision in minutes.