Tackling Bad Credit

The first time I heard the term credit history was when I approached a lender for a secured loan. Being a first timer I was completely ignorant of the procedure and didn't even know that a credit record of our transactions is prepared by some credit reference agencies.

Thanks to the discipline in making the repayments to the loans and mortgages, I never let my credit history degrade. But there are many who are not as fortunate as me. A recent statistics revealed that one out of every five people is having a bad credit history, i.e. a sizable part of the population has defaulted at some point of time in the past.

Loan providers are not as generous to the people having a bad credit history as they are to people like us. Whatever be the reason of the default, loan providers always believe that the borrowers intentionally default on the loan. A play safe policy describes their dealings with such borrowers. The more cautious lot of lenders will immediately reject the applications. The remaining lenders provide for the security of the amount lent through a higher interest rate.

Lenders may peg the interest rate according to the risk perceived. Some lenders may try to overcharge borrowers who are facing an urgent need of money and lesser sources whom they can approach for a fulfilment of the need. Borrowers may thus have to pay excessively for the bad credit that they have acquired.

Are the borrowers responsible for the bad credit that tarnishes their credit history? In the legal circles, the borrower cannot be absolved of the responsibility, even though they are unintentional or due to his ignorance. "Ignorance of law is no excuse", thus goes the legal maxim.

Putting aside the legal point of view, we find that it is the lenders who are responsible for the majority of times. They try to sell inappropriate financial products to ignorant borrowers, by concealing basic details about the product or by misleading borrowers by furnishing wrong details. For instance, borrowers are advised to take unsecured loans, with the lender stressing more on the disadvantages of the secured loans. The borrower being ignorant about the loans market completely depends on the lenders advice, and thus takes unsecured loans which are more costly. These may become burdensome in the long run and may lead to defaults.

Bad credit history can be better understood by learning about the various causes of bad credit history. This can also give an insight the ways to escape the bad credit cases to maintain the credit image.

Arrears:

The number one reason for bad credit is arrears. Arrears are the result of failure to make the payments to the debts taken. While lenders believe that the borrowers do intentionally default on debts, this may not be the reason every time an arrear takes place. Borrowers try their best to be regular on payments, but the sizable share that they take of the salary or wages, leave too little even for the necessary expenses. However, borrowers cannot be absolved entirely of the responsibility of the arrears. Had the amount of debts been lesser, the chances of arrears would have lessened.

County Court Judgements

Except in cases of bankruptcy, it is difficult for borrowers to not pay the amount received. Lenders recover the amount through legal action against the borrower known as County Court Judgements. However, lenders fear dealing with borrowers who have County Court Judgements. They contend that it is difficult to recover the amount lent from people having CCJs. A few lenders may however accept two-three CCJs as admisssible. The rules to deal with the lenders may differ according to the lending policy of the lenders. Lenders however, stretch the rules not with a sense of generosity, but with the intention to get a higher rate of interest.

Individual Voluntary Arrangements

Individual Voluntary Arrangements or IVAs for short are drawn in order to escape bankruptcy. While the lender could have received a lump-sum payment, he has to make do with a monthly payment through instalments, because of the instalments. Thus IVAs are often counted along with the other bad credit causes and people with IVAs face difficulties in qualifying for the loans

Self employment

Self employment is treated as a bad credit case because of the lack of stability in income that characterises them. Profits comprise the main sources of income of self employed people. These are dependant on the operations and vary over the months and years. Lenders fear that the self employed people would not be able to make the repayments during the periods when the profits are low.

Unemployment

Unemployment is a condition when a person is off work because of reasons that may be controllable or uncontrollable. Though these people receive aids from the government, lenders fear offering loans to them.

Miscellaneous reasons

Many more reasons may affect the credit history over a period. Sometimes these are as trivial as a divorce. However, if the lenders feel that these reasons are irrelevant to the persons finance, they may not discriminate on these bases.

Whatever be the cases of bad credit, no borrower is ever starved of credit, provided they have the patience to search over the hundreds of lenders and the readiness to pay the extra cost.

James Taylor holds a Master's degree in Commerce from JNU he is working as financial consultant for http://www.chanceforloans.co.uk To find a personal loan, bad credit loans that best suits your needs visit http://www.chanceforloans.co.uk

---

Looking for that Low interest Credit Card?

If you have been shopping around for a Low Interest... Read More

Do You Know Whats On Your Credit Report ?

It is important to know your credit rating for a... Read More

Credit Repair Myths and Facts

There are no secrets to repairing your credit. Many shady... Read More

Credit Scores and Loan Applications

Keep Your Credit History Clean - Remove A Negative Credit... Read More

Establishing Credit ? What You Need To Know Part 2

In my previous article "Establishing Credit ? What You Need... Read More

Credit Report ? Look Out for Your Debit Report, Too

Most consumers are aware that there are companies that keep... Read More

Credit Cards And Loans - So Many Options - So Little Time

Credit Cards and Loans sounds like just two things, but... Read More

Keep Your Credit History Clean - Remove A Negative Credit Record From Credit Report

The three major credit bureaus, Experian, Equifax and Trans Union... Read More

How To Prevent Fraudulent Credit Card Transactions

What Are Possible Signs of Fraudulent Transactions see at Web... Read More

Warning: Free Credit Report Imposter Websites Springing Up on the Web

A recent amendment to the federal Fair Credit Reporting Act... Read More

Dont Dig Your Own Pit

If you want to enjoy your life out of spending,... Read More

ChexSystems: Who They Are and How it Affects You

ChexSystems is a company that maintains a subscriber membership service... Read More

Types of Credit Cards

There are a whole variety of different types of credit... Read More

Small Business Credit Cards

So what do you look for when applying for a... Read More

The Truth About Credit

What you might not know about credit.Some people don't know... Read More

What You Need to Know about Debt Negotiation on Credit Cards

Debt negotiation on credit cards is often referred to as... Read More

Credit Card Rates - Negotiating Rates with Your Credit Card Company

Ok, let's face it, everybody hates high credit card rates,... Read More

Consumer Credit Reports

A consumer credit report is a factual record of an... Read More

Repairing Your Credit Score and Clearing Derogatory Marks on Your Credit Report

Raising your credit score can be a fairly simple and... Read More

Credit Repair Scam - How To Avoid Being A Statistic?

A good credit history is critically important for the consumer.... Read More

Common Credit Score Myths

A lot of credit score myths about fico score ratings... Read More

Bank Robbery Growing In U.S.

Bank robbery has grown to become a huge problem in... Read More

3 Free Credit Reports For You

If you were to tell someone that they can have... Read More

SuperCharged Secret 3, Credit Card Utopia

TURBO-CHARGED KILLER RATE SAVING INFORMATION!Let's just take a brief moment... Read More

Low Interest Credit Cards: A Thing of the Past?

With interest rates rising, low or zero percent credit cards... Read More

How to Evaluate and Raise Your Credit Score

Why do some people get offers for pre-approved credit cards... Read More

How Creditors Measure Your Credit Rating

Creditors will measure your credit rating based on the following... Read More

Compare Credit Card Offers and Reward Yourself

Here's a simple system on how to pay zero interest... Read More

Different Ways to Borrow Money

There are many different ways to borrow money. Outlined below... Read More

Why Your Credit Score is Important

Your credit score can either haunt you or reward you.... Read More

Credit Card Balance Transfers Explained

What is a balance transfer ? A balance transfer can... Read More

What is Credit Repair and How Can It Help You?

There are millions of consumer credit reports on file from... Read More

Credit Repair Services vs. Do-It-Yourself Credit Repair

Millions of Americans suffer because of bad credit these days,... Read More