One of the worst things about having a bad credit rating is that it can become a bit of a vicious circle. Often the reason for the financial difficulty is something that lasted only a short time - a period of unemployment or some unexpected expenses, for example. And because we're not all financial wizards, we sometimes make wrong decisions or try to sweep things under the carpet. Eventually, however, we learn from our mistakes and get our financial health off the life support machine. But that credit history just won't shake itself off. When we're ready to prove to the powers that be that we can indeed be trusted to borrow money, it can be at worst impossible and at best very expensive to do.
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As credit reference agencies have become more efficient, more and more of our past transactions are being factored into our credit score, which for some of us is bad news.
But is it all doom and gloom? Interestingly, the accuracy of data has meant that it's a lot easier to get caught in the "bad credit risk" category, and rejection is ever-present in our minds when we apply for a loan. What people forget, however, is that the credit reference agencies merely feed a credit score to the lender, who will decide whether or not to lend based on a simple risk assessment. Some companies are more lenient than others, and now there are lenders who specialise in bad credit loans.
The bad credit loans market is becoming very competitive. Whilst no one is pretending a borrower with a poor credit history will ever be able to borrow at the low rates available to one with a flawless history, there is such a range of deals out there that having a look around is becoming more worthwhile. And the offers that some lenders are making are forcing other lenders to look over their shoulders, especially now that rates are so easily comparable online.
To be sure, the cheapest form of credit available to those with bad credit is the secured loan. This is generally available only to homeowners, as their home is used as security on the loan and it can, should the borrower default, be taken possession of in order to recover the owed amount. Where some borrowers see risk, others see opportunity: the chance to prove one's worth as a trustworthy financial player.
If you're not a home owner, it will be a little harder to attain credit if your history is less than perfect. However it will not be impossible, although you will need to be prepared to pay higher rates of interest or possibly have someone else act as guarantor for your loan. They will have to pay up if you fail to meet your requirements, so a credit search will probably be carried out on them too.
Bad credit loans are a great way to start to rebuild a damaged reputation and are worth looking into if you've been rejected by the mainstream lenders.
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