A bad credit score will cause a moneylender to consider you a risk. There are ways to plan right now if you are considering applying for a loan sometime in the future. Having a credit rating that doesn’t satisfy a moneylender will adversely affect your borrowing options. Some lenders claim that they will lend money to anyone regardless of a bad credit rating or history, but many of these financiers cover themselves by demanding unrealistically high interest and repayment terms.
There are warning signs that moneylenders will look for before agreeing to lend money. Avoiding some common mistakes will assist you greatly in borrowing money.
Not paying bills on time
Finding yourself in a tight financial squeeze is a much more common occurrence than you may think. Unforeseen circumstances can catch us unawares, creating a scenario where repayment schedules outpace earnings. An employment downturn, business loss or health problems are just a few obstacles we may face during our lives. Often, it seems convenient to take the easy way out and ignore the bills hanging over our head. This can be a recipe for financial disaster.
As much as possible, bills should be paid on time. Avoiding your financial obligations is the guaranteed way to receive a bad credit rating. At this time it’s important to swallow your pride and inform any company you are having difficult financial issues with. You might discover that your circumstances are not uncommon and that many companies will be happy to offer you an extension on your repayment schedule. There may even be options to pay smaller instalments over a longer period of time.
Declaring bankruptcy is a sure-fire way to negatively affect your credit score. It’s true that declaring bankruptcy can seem like the only way out in some circumstances where debt has spiralled out of control. If you are affected in this way, take the opportunity to search out professional advice prior to taking any drastic measures as bankruptcy will leave you with a bad credit score for many years to come.
Avoidance of loans
Many people are proud of the fact that they pay cash for everything and never take out a loan. On the surface this would seem an admirable achievement and a sign that your finances are always held tightly under control. However, credit agencies will often consider your never repaying debts as a sign that you may lack an understanding of credit systems, and equate no debt as being equal to bad debt.
Having a history of successful loan repayments will look much better to a lender than a history of no loans at all. This is especially true if your previous loans were the result of sensible investigation of favourable interest rates from reputable lending institutions.
Cancelling credit cards
Credit card debt can be financially crippling. The struggle to pay off the debt can be a burden and finally achieving a zero balance owing will be a huge weight off your shoulders. When free from credit card debt you will possibly be inclined to cancel your card. However, the fact that you have paid off your card means that your credit rating will be improved. Keeping the card and owing nothing on it will show up as a good credit rating for many years to come. If necessary, keep the card out of site and locked away in a safe place to avoid the temptation of using it again.
Check your credit rating
Never assume your credit rating is fine. For example, you may have changed address several times during the last few decades and not realised that power or utilities bills were left unpaid. This happens often as customers are inclined to change utility companies or financial institutions while searching for the best deals, and sometimes leaving behind a string of unpaid debts.
It’s easy to check your credit rating with a credit reporting agency. The reports are free and available in a matter of weeks. Any discrepancies on the report should be a cause for concern, but can usually be fixed by contacting any affected parties or financial institutions. As a last resort, consult a debt consolidation agency that can assist you in regaining financial control.
Taking simple steps to keep finances in check, and being upfront about your desire to fulfil financial obligations will go a long way toward your getting a loan when you need it most.