Why do I have a bad credit score and how to improve it?

It isn’t nice being rejected by a lender. You may have set your heart on a holiday or new car, or simply want to roll all of your monthly payments into one, but your plans could be wrecked if you have a bad credit score. When you get that credit rejection, it’s highly likely that there’s something the bank or other lender is seeing on your credit record which is acting as a big red flag. This can seem like the end of the world: a big setback that has wrecked your plans and put you back at square one.

But it doesn’t have to be like that. Hundreds of thousands of people in the UK suffer from poor or bad credit records and many of them have been able to take concrete steps to fix them. And once you have put yourself back on a sound footing with your credit record, it’s just a matter of discipline to ensure that you continue to manage your finances wisely and ultimately get access to more mainstream credit again.

What is a bad credit score?

The three major UK-based credit reference agencies – Experian, Equifax and CallCredit – maintain data on every borrower in the country as well as records on utility and insurance accounts as well as mobile phone contracts. The information held on each person includes a list of existing and past addresses, the history of payments on each credit account going back six years and whether those payments have regularly been made on time. If a person has any defaults registered against them, county court judgements (CCJs) or bankruptcies, this information will also be recorded on his or her credit record.

Anybody has the right to see their credit record. An individual can can apply to one or all of the reference agencies for a copy of the record in return for a small fee. Alternatively, all three of the agencies offer online subscription services where you get access to your credit record as it is updated every month. Once you get hold of your report, you should be able to spot exactly where you’re having trouble and what constitutes a bad credit record.

While you will be able to see immediately where your payments have been late or you have defaulted, figuring out how the agencies and lenders use the data can be more difficult. These organisations use a credit score – usually a figure between 300 and 900 although this can vary – which represents the risk that a particular individual might pose to a lender. In short, the lower the score, the higher the risk, while those with the best credit scores will have higher figures registered against them. Furthermore, that degree of risk might be expressed by one or more of the agencies as ‘very poor’, ‘poor’, ‘fair’, ‘good’ or ‘excellent’. If you have a rating of somewhere between 300 and 400 then this might be classed as ‘very poor’ or ‘poor’ while those with scores of between 650 and 900 may be judged to be ‘good’ or ‘excellent’ risks.

If you are in the bottom categories, then you may well find it difficult getting accepted for most mainstream forms of credit. These include loans, bank account overdrafts, mobile phone contracts and credit cards. In some circumstances, utility companies may be reluctant to set up new contracts and offer you pre-paid accounts instead.

There are some lenders who will offer credit to people in these categories but these may come with higher interest charges, lower capital sums and, occasionally, conditions about security or guarantors.

If your score is somewhere north of 400 but below 600, you will probably be classed as a moderate risk by lenders. That means that you will have access to loans and credit cards but you will probably face higher interest rates and lower credit limits than people with good or excellent records.

Those with the best credit records will be accepted for most or all loans that they apply for and will benefit from the lowest interest charges.

How to Improve Things
It is eminently possible to repair a bad credit score given time and good financial management. While there is no magic bullet, the experience of thousands of other people proves that even those with the worst credit records can find themselves back in the ‘excellent’ category within one to two years if they stick to some fairly simple steps:

    1. Always repaying on time, every time

Financial mistakes don’t stay on your record forever. They only last for a maximum of six years and so long as you make your repayments on time from this point on, this will start to outweigh any of the negatives on your record which will gradually get pushed down the list over time.

   2. Close accounts that you don’t use

Paying off loans or credit cards when you can afford to is sound financial management. It’s no good saving money if you have got debts that you can afford to clear. Rather than spending money on something you don’t actually need, look at the cards that you may have reached your credit limit on. If you pay these off or substantially reduce them, this will reduce your debt to income ratio and this is one of the most effective ways of improving your credit score quickly.

   3.  Consider a guarantor loan

While it may not be obvious, a guarantor loan is a great way to rebuild a bad credit record. It works because a borrower uses the good record of somebody else to borrow the money they need – be that person a family member or friend. This guarantor is the security that the loan will be repaid and will be liable to make repayments if the applicant slips up. But the great thing about guarantor loans is that every time the borrower makes a repayment on time, this goes on his or her credit record and will gradually improve even the worst record.

   4. Choose the right credit card

There are plenty of credit cards out there designed specifically for people with poor or bad credit records. These may be advertised as ‘credit builder’ or ‘credit repair’ cards. They are generally offered with higher interest rates and lower credit limits than other, more mainstream cards, but they give people the opportunity to build up a record of financial discipline by making repayments on time.

Article provided by Mike James, an independent content writer working together with technology-led finance broker Solution Loans, who were consulted over the information in this post.

source: 20smoney.com

Eliminate Financial Stress With A Personal Line Of Credit

There are plenty of reasons you might find yourself in some financially dangerous waters. You might have had to run your child to emergency care and are left to deal with the subsequent bill; you could be in between work contracts and come up short for your next utility bill. Whatever the case may be, sometimes you aren’t prepared for what life throws at you – through no fault of your own. But that doesn’t make the reality of being strapped for cash any less harsh. When you find yourself momentarily short on money, do you know where you can turn?

Not everyone is blessed with family or friends who can help you balance the check book when you’re in need of some help. Even if it’s just $300 to smooth out the edges until your next contract starts up again, that can be out of your (and your social circle’s) abilities. Luckily, there’s an organization that you can turn to and no – it’s not the bank. In order to secure a loan with your local financial institution, you have to jump through hoops and hurdles just to speak with a bank representative, after which you’ll have to wait weeks while they review your application and credit score. When you’re bills are due in a few days, you can’t afford to wait and play by the bank’s schedule.

The alternative that you’re looking for is a personal line of credit with an accredited direct online lender. These lenders understand the importance of having cash for when you need it, so they’ve developed a process whereby your application won’t have to go through credit bureaus and other institutions before it’s approved. As opposed to the average traditional lender, they’re the lender that directly approves and facilitates your loan. By cutting down on the middle man, they can give you your loan that much faster.

A direct online lender like MoneyKey can approve your application quickly and deposit your approved limit in just 24 short hours. The limit of a personal line of credit from MoneyKey depends on your state of residence, as they pride themselves in following the rules and regulations provided by the state. That’s because they want to set you up with the appropriate tools for responsible lending habits. By following state sanction laws and providing you with information regarding online lines of credit, they want you to flourish. They don’t want you to take out a line of credit amount higher than you can reasonably pay back any more than you do.

Having a line of credit for whenever you find yourself short on cash (be it when your child is in the hospital or when you’re a couple of weeks away from the start of another contract), can take a stressful situation and make it more manageable. When you finance your credit with a responsible direct online lender, you can trust that you’re covered for when life puts a crick in your budget.

source: christianfinanceblog.com

Can One Cash Advance Help You Get Another?

When it comes to money management tips for students, the main tip that all students should heed is this: Work hard to make sure that you maintain a good credit score. It can impact your financial options for the rest of your life. That being said, it is important to look at the impact that taking out even small loans can have on your ability to get similar loans in the future.

Have you already gone out and picked up a cash advance sometime in the last few years, and did you pay it back on time? Are you now wondering if what you did with that advance is going to help you get another one? In some ways, this is like looking at a good track record for any type of loan. If you get two car loans and pay them off in a timely fashion, the dealer is going to be very likely to give you a third car loan as long as your financial situation still looks good. Based on what you have done in the past, he is going to trust you.

To some degree, this is also true with cash advances. The lenders are always trying to minimize risk. They want to loan out money to people who are actually going to return it to them. This makes their jobs easier and ensures that they do not have to go through expensive court cases and claims processes. It is ideal for lenders, and they are going to like working with you if your track record shows that you are this type of borrower. Your history of taking out advances and then paying them off is going to help you out.

However, it is also worth noting that most cash advance lenders do not look at your credit history. Since the loans are small, they are not as worried about what you did or did not do in the past. They are far more intrigued by your current income levels. They know that your prior struggles, if you did not pay off some loans when you were unemployed, are not going to mean anything if you now have a job. Therefore, they may not even check your history, so your positive borrowing habits from the past might not help you.

However, you should not worry about this too much. If you have a good track record, it certainly will not hurt you. It is either going to help or it is going to be ignored. Either way, you have a good chance of getting the loan that you are after. It all depends on the lender that you choose and the way that they set up all of their policies for screening and approving potential borrowers.

source: 20smoney.com