Bad credit can affect us in all walks of life. In fact, it’s often the reason we’re refused a phone contract, a mortgage or a credit card. But what is it? And what do you need to know about it?
Today we’ll be going over the basics on bad credit. If you are concerned about your rating and need a rundown of the core things that influence it, you’re in the right place! Let’s take a look.
Bad behaviour will hurt your credit rating
If you fail to make repayments on a household bill, a loan or a credit card agreement, you put yourself on the path towards a bad credit rating. In order to rebuild your credit score, it’s important to improve your behaviour when it comes to paying certain bills.
Even if you’re only able to make the minimum payment on a credit card, this still shows lenders that you’re willing to commit to repayments which will, in turn, raise your credit score. Credit ratings are all about trust - demonstrate that and you will see improvements. Go against agreements and fail to make payments, however, and you’ll take a hit on that rating.
Avoid charge-offs and settled accounts
These two will damage your credit rating in a real way. A charge-off is when a creditor essentially removes a debt due to the belief that it will never be paid – your account is closed at a loss.
This might seem a relief to someone in such a situation, but it will damage your credit rating. Before this happens, most lenders will sell such debts to a credit collection agency.
A settled account is when you and your lender agree to accept a smaller amount of money than was originally agreed, and to close your debt or account after payment is received. Once again, while this might be beneficial at the time, this still counts as negative information on your credit history.
What to do when you are in financial difficulty
Being proactive in this manner is the best thing you can do.
It’s understandably scary; your reluctant to tell the lender about your financial difficulty! It takes a little bravery to draw up a list of obligations and call them up, but it’s very much worth it the lender will listen and work with you to reach an agreement, it’s in their best interests too!Write them down, call them up, get it done. You’ll be glad you did.
What should I do if I’m refused credit?
If you’re refused credit from a lender, it’s important to learn of the reasons behind this refusal. Your lenders are under no obligation legally to tell you why your application has been denied but most lenders will be a member of the industry’s Guide to Credit Scoring which basically means they’re devoted to giving a general reason for your refusal.
Once you know the answer, you can begin to improve your credit history in a more efficient manner.
What to do if you feel you’ve been turned down unfairly
If you feel your credit refusal is of an unfair nature, you have every right to appeal to the lender, which will generally mean they will provide more information on why you’ve been declined a loan.
Should you still be no further forward in your search for a loan, it’s important to hold off a while before applying for another credit card or loan as recent rejections can count badly towards future loan assessments.
Alternatively, you can seek specific loans designed to help people with bad credit. Unsecured loans offer financial help to those who may be turned down elsewhere and can even be used as part of a debt management programme to help get your debts and spending in check.
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Thanks for stopping by at the Opal Loans blog page! We regularly post interesting and informative articles on how to live a financially secure and responsible life. If we can assist you with a loan to help you meet your financial goals, take a look at our main page. It’s what we do.