What a Bad Credit Score Can Do to Loans
Have you recently discovered you have a bad credit score after being rejected by a loan company? Often, people are not aware that their rating is poor. Only when they ask for credit for a phone contract, car finance deal or loan company do they discover it is low when they are rejected.
But what exactly does a bad credit score have to do with loans? Is it really that big a deal? The answer is that it can be; it all depends on circumstances. Let’s explore this topic in more detail.
What is a Bad Credit Score?
Everyone is going to have a credit score. This is something that is going to go up and down during your lifetime, depending on your spending habits and credit agreements. Your rating can be poor because you have missed payments in the past and have not paid your bills. Hence, if you fail with financial commitments, the score will decrease each time. You can even have a poor score because you do not have any credit agreements.
There are tools you can use on the internet to check your score. It will tell you the rating and whether it is good, average or poor. Note that you can change your credit score over time with the right actions.
Does a Poor Credit Rating Mean You Cannot Get a Loan?
Now that you understand what a bad credit score is, you want to know what it has to do with loans. Essentially, this is an indicator to companies that do not know you. It tells them that you might not be a suitable candidate for a loan. In particular, you might not be trustworthy to pay it back. Of course, you know that this is not true and you might be worried you cannot get a loan.
Well, there are going to be some companies that will not lend you money. But, some providers specialise in bad credit loans. You just have to explore your options and find them. For example, My Quick Loan can search for a quick same-day bad credit loan for you. You can identify the providers that can supply you with a loan, choosing the best one for your own situation.
Therefore, do not give up before starting the process. Using the right website will help discover the best options. Plus, a bad credit score will not last forever. There are things you can do in the meantime to secure the best loan in the future.
What Can Some Loan Companies Do?
We have mentioned that some companies might be reluctant to offer you their products. But, they might bend their offerings to suit your score. Here are some things that the big companies might do.
Some Loan Companies Will Change their Offer
Note that some big companies will still offer you a loan if your score is fair or poor. But, they will change their offerings because of this. For instance, they might choose to give you a smaller amount of money than you really want. Alternatively, they could hike up the interest rates as a way to protect themselves. This is something to take note of and consider when you are deciding on a loan.
Higher Interest Rates to Pay
With a disappointing credit rating, you can expect to pay higher interest rates. Loan companies use this as an excuse to charge you more interest. They can be the cost for the process, as well as to provide them with protection. Either way, you can expect this to be part of the deal if they offer you money. If you decide to go ahead, it can be best to choose a loan over a shorter time. This way, you are going to be paying less interest. However, you only do this is you can afford to. Otherwise, you can be hit with fines and penalties for late payment.
What Methods Can Improve a Credit Score?
As we have mentioned, your credit score does change. It is not something that is fixed permanently. When you are careful, you can boost your score. You have to instil some good habits into your daily life. For example, if you manage to get a loan, you want to ensure that you are paying back all the money on time. This will improve your score so you have more options in the future. The priority should always be paying your bills in full and when for the deadline.
There are some other methods you can use to boost your rating. You can get on the electoral roll. You can also check your credit report for any mistakes. If you have a credit card, make sure that you are not using all the money available. Instead, keep the credit utilisation low.