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

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Credit Information:

Related Articles

Identity Theft - Dont Think You Are Immune
As identity theft becomes more prevalent, the need to regularly check your credit report is veryeasy to see and understand. Two big headlines in the news recently point to how closely tied yourcredit report and identity theft are.
Credit Repair: How To Deal With Your Creditors
If you are in danger of credit problems because you have more debts than you can handle, there are things you can do at least keep your creditors reasonably happy.First, prioritize your debts or rank them in terms of the ones that can give you the most trouble the quickest.
Credit Counseling: Could it Work for Me?
In the face of financial hardship, many seeking a responsible solution turn to credit counseling. Credit counseling is, all too often, the last stop before bankruptcy.
How to Deal with Hire Purchase Debt
WHAT IS HIRE PURCHASE/CONDITIONAL SALE?Although people often talk about "buying on HP", Hire Purchase Agreements are quite unusual these days. Cars are the most usual goods sold under Hire Purchase or Conditional Sale Agreements.
Credit Cards - The Basics
How Lenders Operate - And How They'll Make a Tidy Fortune from the UnknowingCredit card companies might seem like immensely clever, money making enterprises that exploit every loophole to maximize the interest payments - and profits - they are taking from you every month. Nothing, however, could be further from the truth.
How To Prevent Fraudulent Credit Card Transactions
What Are Possible Signs of Fraudulent Transactions see at Web Hosting Companies?Customer wants to pre-pay for a yearDomain Name Registration for 5 years or moreOrders using free email address providers like Hotmail, Yahoo, etc.Usage of multiple cards to complete order.
The Easy Way To Gain Access To Your Free Online Credit Report
When you apply for credit, those lending you the money want to know if you are going to pay them back. One way they decide if you are a good risk is to see how you've dealt with other people's money.
How To Get a Low Interest Credit Card
Consumers often have the first credit card that they ever applied for, never really analizing how the interest rate affects their payments, but many other options exist and can help consumers decrease their payments and achieve financial stability.With interest rates on some credit cards rising to over 23%, even low balance credit card debt can be crippling.
Credit Card Expenses Are Killing Your Budget!
Do you know the costs associated with your credit card? Do your really know? Many people assume they do but aren't aware of the hidden fees that many credit card companies are charging you month after month. In fact, if you don't keep a close eye on your credit card, you may end up paying hundreds of extra dollars per year-without ever knowing it! And if you're trying to budget your money, those hidden fees can add up!Let's take a look at some of the most common credit card fees, and then talk about how you can avoid them.
Free Credit Report - Really
2005 marks the year that consumers will be able to get a free credit report each year. The roll out of the Fair and Accurate Credit Transaction Act signed into law by President Bush actually began last December 1.
SuperCharged Secret 4, Credit Card Utopia
YOU SCRATCH MY BACK, AND I'LL BUY SOME MORE BEER!Let's just take a brief moment to recap:If you've been following along on this journey with me, learning the 5 Super-Charged secrets to Credit Card Utopia, then you now know 3 very important things:You now know how to take advantage of zero to low interest credit card offers.You now know that there is safety in numbers, and you know the magic "Who's Who" of the major credit card companies.
Useful Tips On Avoiding Credit and Charge Card Fraud
Credit and charge card fraud costs cardholders and issuers hundreds of millions of dollars each year. While theft is the most obvious form of fraud, it can occur in other ways.
Useful Tips When Choosing Credit Cards
Chances are you have received your share of "pre-approved" credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept "before the offer expires.
Credit Cards - A Blessing or a Curse?
Owning a credit card can be quite an advantage. Whethermaking online purchases, booking an air ticket or a hotelroom on the phone or simply being in need of someemergency cash, having a credit card can be a big help.
How Credit Scoring Works
The all important credit score! It determines the amount of loan you can get, it determines the interest rate at which you are charged for a loan, etc. Your credit score plays an important figure in your financial life.
Credit Reports - Why Your Credit Score is Important
If you have never heard of a FICO score before, you should become familiar with the term. Named for the firm that invented it, Fair Isaac Corp.
Read and Understand Your Credit Card Statement
Have you ever looked at your credit card statement and ended up just scratching your head in frustration? Well join the club! But don't take any comfort in the fact that you have plenty of company, because lack of knowledge can cost you?.right on your credit report, and once there can stay with you a while.
Rebuild Your Credit the Right Way the First Time
If you are one of the millions of people out there with bad credit you need to step up and start doing something to get yourself back into credits good graces. Having good credit is the only way to assure that you will get the best interest rates on any loans and credit cards that you apply for.
Credit Repair Kit Sound To Good To Be True? It Is.
A lot of people have bad credit. It is unfortunate that good people with good intentions are sometimes lured into credit card offers with outrageous interest rates or convinced to buy a new, overpriced car that they cannot afford.
Ways to Look Good without Selling Your Soul to the Credit Card Sharks
1. Buy clothes at thrift stores.