If you believe you have a bad credit rating and fear that your poor credit history will affect your chances of getting a loan, don't despair as things might not be as bad as you think.
Most lenders base their decision on whether or not to offer you a loan following a process known as credit scoring. The lender will give you a credit score on the basis of the information you provide on the application form such as your age, employment status, postcode, income etc. In addition information on your credit file will provide details as to whether you have any existing loans, the number of other credit applications you may have made, whether you have missed repayments on previous loan arrangements, have any CCJs registered against you and whether you have ever been declared bankrupt.
A bad credit history can creep up on anyone, not just those who regularly miss payments or can't hold down a job. Redundancy, bereavement or divorce are some of the most popular reasons why people end up getting saddled with a poor credit rating. Years of steady financial arrangements can be undone so easily.
If you end up with a poor credit score you will probably be turned down if you apply for one of the loans with the best rates. However, lenders use different credit scoring methods and have different lending policies. Some lenders are more willing than others to offer bad credit loans, particularly those which are secured on a property, to people with bad credit history. Some lenders will simply not lend to people who have a County Court Judgment (CCJ) against them, while other specialist lenders welcome such individuals.
If you have been turned down by one lender you may still be successful with another. Many people are turned down for loans, but that doesn't mean the only option for them is a lender who charges extortionate rates. Having a poor credit rating should not prevent you from shopping around. In recent years an increasing number of lenders have relaxed their lending rules or developed specialist lending divisions to cater for people with bad credit history. However, the credit crunch which began to bite at the end of summer 2007 has meant that lenders have either withdrawn their bad credit products or upped their rates.
Inevitably, having less than a perfect credit history will mean you'll end up being offered a loan at a higher rate of interest than the best on the market, but shopping around should mean your interest charges should not be too much higher.
It's important to select which companies you apply to as you should refrain from making mass applications, as every credit application will show up as a "footprint on your credit file. Too many credit searches might indicate multiple rejections which might harm your credit status further.
It's imperative you realise that if you opt for a secured loan, your home maybe repossessed if you do not keep up the repayments. So a decision to apply for a secured loan should be considered carefully.
For instance, if you are looking to consolidate debts into a single loan at a lower rate of interest, be wary about swapping unsecured debts into a debt secured on your property.
Use the search form at the top of this page to see which companies provide loans to people with poor credit history.