Bad credit isn’t the be all and end all when it comes to securing credit!
If you’ve found yourself in difficulty with credit in the past, it might feel as though you won’t be able to secure much-needed finances going forward, but that isn’t always the case and there are lenders who specialise in finding suitable loans for all credit histories.
While lenders look at your credit history, income, and circumstances in order to reach a decision on whether to lend to you, this doesn’t necessarily mean you have no options – your bad credit score may just influence the types of credit you qualify for. Providing you’re in a stable financial position now and you’re confident you can keep up with the monthly repayments, there may still be borrowing options you could consider.
Secured homeowner loans
If you own a home, but you’ve got a poor credit history, you may find that a secured loan – also known as a homeowner loan – is more suited to your circumstances than a personal loan.
A secured homeowner loan will be just that – secured against your home. So remember, falling behind on repayments with a secured loan could put you at risk of losing your home. You should only ever consider taking one out if you’re confident that you’ll be able to afford the repayments both now and in the future.
Personal loans for bad credit
If you’ve got a poor credit history, you may find it more difficult to get a personal loan. As this type of loan isn’t secured against anything, lenders may be more reluctant to accept your application as they won’t have the same safety net if you fall behind on your repayments.
However, even with a bad credit score, there may be personal loans out there which are available to you. In order to justify lending to an individual with bad credit though, these will probably be at a higher interest rate. If you’re a homeowner, you’ll find that secured loans may still provide you with a more competitive deal if you’ve had problems with credit in the past.
Consider a credit card
If you’re looking to borrow some money but have a bad credit score, depending on the amount you’re looking to borrow, you may be able to get a credit card instead of taking out a secured or personal loan.
Some lenders specialise in credit cards that are suited to people who may have struggled with credit in the past. Although the interest rates can be much higher and the credit limits are usually lower, they can be a good solution to short-term borrowing. Plus, they could even improve your poor credit score if they’re used responsibly. But remember, failure to make payments on time and in full could impact your credit score.
So, as long as you make the minimum repayment each month and don’t go over your credit limit, your bad credit history may slowly begin to recover. However, paying off the balance in full and on time every month shows you’re good at managing your money.
Improving your bad credit score
As well as keeping on top of any credit card payments, there are some more quick and easy ways to start boosting a bad credit score today. The better your credit score, the more likely you’re able to access better financial products and lower interest rates – so it’s worth doing! Here how…
Make sure you’re on the electoral roll
Registering to vote and having your name is on the electoral roll can have a positive impact on your bad credit score. Why? Because lenders check the roll as a precaution against fraud since it shows them the address at which you’re registered to vote.
Separate your finances
If someone you’re financially linked to someone who has a bad credit score, where possible, disassociate your finances from theirs. If your partner or flatmate has struggled with credit repayments in the past, having a joint bank account to pay bills, for example, means their poor credit rating will have a negative impact on your score. Something as simple as setting up a separate bank account could boost your chances of being accepted for a loan.
Only borrow what you need
This is an important tip for everyone and anyone – but especially those with a bad credit score. This is so you don’t overstretch yourself by borrowing too much and then find yourself unable to repay it at a later stage.
Missing payments can damage your poor credit history even further. As you’ve already got a shaky credit past, more negative points against you could make future borrowing more difficult.
You should only ever borrow the amount you need when looking for a loan or you could look at alternative financial products. Another option could be to work on improving your bad credit score first, so you can access better deals at a later date.