There are many reasons that someone might have bad credit. This can impact whether you are accepted for loans in the future, for mortgages, will impact the interest rates you are offered and more. You could also be turned down for credit. I look at what your credit score is, what it means, what affects it, how you can improve it and what to do if you need a loan when you have a low credit rating.
What is Your Credit Score
Your credit rating paints a picture of where you are financially and how you manage your money. This is important because lenders use your credit score to determine whether or not they think you would be a risk as a borrower. Decisions about what financial products are available to you are based on this. The information that makes up your credit score include how much outstanding credit you currently have, whether you have any late payments, missed payments, defaults, CCJs and other financial arrangements. Only paying the minimum payment on your credit cards, for example, can alter your score.
Keeping Your Credit File Up To Date
You can access your credit rating via services such as Equifax and Experian for free. If you want more in-depth information about what makes up the score, a monthly subscription fee is payable. This information can be very useful as it helps you pinpoint what might be affecting your score. Your credit score file may have information that is wrong or out of date and it is up to you to make sure that this is rectified. When searching for credit for your car, a loan or even student loans it is essential that your credit score is up to date and doesn’t let you down.
Causes of Bad Credit
A low credit score may be caused by many things. If you don’t stick to your payment agreement, are late, if you have defaulted or even if you fall victim to identity theft, you can be vulnerable. If you have never had credit before your score might be low. This isn’t because you are bad at managing money, it is because you haven’t shown that you are good at it yet. Each lender has their own algorithm when it comes to lending on top of your credit score but what your file shows them does make an impact on lending decisions.
When You Need Credit But Have a Bad Credit History
Frustratingly it can be really hard to get what you need from lenders if you don’t have the best credit score, even if it isn’t necessarily your fault (lack of credit experience, identity theft etc). What then do you do if you need a loan to cover house move costs, a holiday, want to consolidate debt and so on? There are now loans from lenders who specialise in bad credit loans. The interest rates tend to be somewhat higher yet it is possible to find decent deals, which for a much-needed loan, is good news. Make sure that you shop around and check interest rates, fees and so on properly, as you would with any financial product.
Moving Your Credit Score Forward
If your credit score is poor or could be better take the time to find out why and work to remedy it. You never know when your circumstances might change, when a loan might be needed, and it’s best to have a credit file that is up to date and moving in the right direction to help you get accepted for the most competitive financial products in the future.