Stuck in the Bad Credit Trap?
Are you having difficulty taking out a loan? It could be because you have a bad credit rating due to hospital bills or even student loans. Lenders always look closely at your credit record or file before giving you a rating which will reflect the level of risk they consider you present to them. Would-be borrowers with a poor credit rating are highly unlikely to be offered the best interest rates for unsecured and even secured loans.
A bad credit rating will reduce your options considerably if you want to apply for a loan or credit card. County Court Judgements, payment defaults or a bankruptcy order all count against you if you are trying to secure a loan. Similarly, late or missed credit card or energy bill payments will also affect your ability to borrow.
If you have bad credit, it can be a Catch 22 situation. You are rejected by every lender to which you apply, and this means you are unable to prove that you are a reliable borrower – the only way of improving your credit rating.
Why Does Having Bad Credit Matter?
A bad credit rating will certainly make it harder for you to get a personal loan or a new credit card, but it may also affect other areas of your life too. For example, if you want to rent an apartment, you might find that you are turned down by the landlord if they run a credit check on you and don’t like what they see. Buying a car, unless you are lucky enough to be able to buy it outright, can also be problematic, and a number of credit companies may turn you down. You could also find that you are paying more for water, gas and electricity than your neighbour who has a good credit rating, because energy companies are unlikely to offer you their better tariffs if they see you as a potential risk. In fact, it is estimated that a poor credit score can add as much as £138 a year to your utility bills.
How Do I Know If I Have Bad Credit?
You probably will not find out that you have a bad credit history until you apply for a personal loan or new credit card and are refused. Unfortunately, a rejected application for credit will be recorded on your credit file, which will only add to your problems, particularly if you collect a lot of them.
Is It Possible to Improve Your Credit History?
Fortunately, the answer is yes: you can rebuild a poor credit history. The trick is to prove to lenders that you can be a responsible borrower who can be trusted to repay credit promptly and regularly. Loans for bad credit are designed with this in mind. They are usually for small amounts that will be repaid over a short period of time. The interest rates on BC loans are high to reflect the risk someone with a poor credit history poses to the lender. However, by paying back the loan within the allocated time frame, you will improve your credit rating, which in turn will mean that you can apply for cheaper loans again in the future.