All banks and credit providers want to know how risky it is to lend you money, so they check your credit report, which is a record of all of your financial services transactions, including payments from. utility bills.
If you try to apply for a new credit card or a new loan with a bad credit history, you could be rejected, and this will show up on your credit report as well, making it even more difficult to borrow again.
Is it possible to borrow with bad credit?
Yes, but it will be difficult. Much depends on the severity of your credit score and the type of loan you want to take out.
There are several options, however, with many credit card and loan companies trying to cater to a growing customer base of people who have bad credit or just have one or two negative ratings on their report.
Comparing the bad credit borrowing options market is essential to finding the right option for you. On Uswitch, you will find the ability to search for credit cards and loans based on those that are best suited for people with “bad credit”.
Read “How to Improve Your Credit Score” below to increase your options and your chances of getting the right type of credit card or loan for you.
Borrow with bad credit
There are a few things you need to be careful about when borrowing short-term money despite having a bad credit history.
First of all, you’re more likely to be turned down for a credit card or loan if your financial history is less than perfect. This means that you shouldn’t be applying for too much credit at the same time.
Discharges show up on your credit report and serve as a warning to potential lenders that you might be at risk. This could mean that you will end up being rejected over and over again, leaving you in a spiral where it may seem impossible to borrow.
Of course, it might be tempting to take out a payday loan, which is a short-term borrowing option for people with bad credit. However, these are very risky with interest charges and penalty fees adding up quickly if you’re not careful.
It’s always cheaper to borrow money on a credit card or a loan, but like any type of credit, you have to be careful and aware of all the risks.
With bad credit options, there is often a much lower limit on the amount you can borrow, and the interest rate will be higher than what you might get with a credit card or a standard loan.
Borrow with a bad credit card
A bad credit credit card is a type of credit card, almost like any other, intended specifically for people who have had difficulty borrowing in the past due to their financial history.
As mentioned above, these credit cards generally have a lower spending limit and a higher interest rate than what is standard in the rest of the market.
This helps the lender to minimize their risk and discourage the customer from overspending on the credit card. Bad credit credit cards are also a useful way to build your credit rating.
They are sometimes even referred to as “builder credit cards” because the low spending limit gives you the ability to pay off your debts in full and on time each month. This will then show up on your credit report and help increase your score.
Some credit card companies offer a “soft” credit check before you apply, and they give you an estimate of how likely you are to be approved. This can be helpful if you are worried about being rejected.
However, it’s best to check your credit report and resolve any issues you might have, such as delinquencies or even something as simple as not being on the voters list at your address.
Borrow with a credit loan
Bad credit loans are similar to bad credit credit cards in that they look like standard loans but target people with bad credit history.
And as a result, they come with a higher rate of interest to reduce the risk for the lender. However, some bad credit loans will still allow you to borrow a large amount of money.
Bad credit loan providers will offer more money if you can offer something as collateral in order to mitigate their risk. It can pose a huge risk to you and your family if you are unable to repay your debts.
Many bad credit secured loans will ask for your car or house as collateral. If you don’t pay, they can seize your property and still ask you to pay off the debt.
How to improve a credit score
There are quite a few things that can impact your credit rating, such as a missed payment, not being on the voters list, or not having borrowed credit in the past.
Checking your credit report is the best way to find out what aspect of your financial history can be improved.
Some credit reporting agencies offer “free credit reports”. While some are free, sometimes they can be quite limited in what they reveal. There are others that cost between £ 10-15 a month, but usually offer a 30-day free trial.
What to check on your credit report:
Any missed or late payments
If you are registered on the electoral roll at your address
What bills you paid
Any CCJ (County Court Judgments)
Your credit score (a calculation of all of these factors – the higher it is, the better your chances of borrowing new credit)
If you don’t have a credit history, this can also have a negative impact. For example, students or people who have just started working may not have paid any bills and never taken out credit before.
While this may make you think you are in good financial shape, it is actually likely to give you a very low credit score. Lenders like to see that you have experience paying off debt (even if that means having debt in the first place), rather than having none.