Is your credit report important? There are a lot of people who would not consider their credit rating as something too important to them in their life. There are others who, while recognising its importance, would not be overly concerned about the issue or understand the reasons for its importance. Well, to those people, they should at least be aware of some of the uses that are made of credit reports in the world in which we live.
Lenders
While it may seem obvious to state it, credit reports are predominantly concerned with assessing the risk involved in lending money to you. Lenders are obsessed with one thing, getting repaid, and their entire industry revolves around making this occur. Therefore, they have developed the credit score that will assess your likely hood of repaying them and this is then used to either approve or reject your application for credit. While this is the basic purpose, some more sophisticated lenders desire to get in on an ever larger share of the market and in order to lend to higher risk borrowers, they create different categories of loans which people with lower scores can qualify for. These loans will invariably have higher interest rates and other less favourable conditions and this will be the price you pay for having a lower credit rating.
Since loans are used to finance homes, education, cars, and most other large purchases in life, the inability to get access to credit, or only to be able to get it at less attractive terms and rates, is a substantially reason to care about your credit report and try to keep it in as good a condition as possible.
Credit reports are also used when you apply for renting or leasing accommodation. This is usually because the landlord wants to be fairly certain that you’ll be able to pay your rent as it falls due. So keeping your credit score healthy at this stage will pay off if you need to be approved for renting or leasing residential property.
There is also a trend among employer to start using credit ratings when assessing job applicants. The reasons they are making use of credit reports are of course different for every employer but there is a consensus that a healthy credit report and a good past record of meeting financial commitments is a good sign that the job applicant is someone reliable and worth employing. While it does seem slightly perverse that the very people that will need a job the most are precisely the ones that can be denied it but that’s the direction things are moving in.
By: Joseph Kenny
Posts Tagged ‘Landlord’
The Truth About Bad Credit Loans And Mortgages
December 1st, 2009
Many people will have the experience of facing financial difficulties at one time or another for a variety of reasons. Being a little short of money can result in you falling behind with bills, bank loans, credit cards, mortgage repayments and alike.
This in turn can lead to having defaults, County Court Judgements (CCJ’s) and even bankruptcy. Even if the problems are short lived they can still tarnish your credit record and make it difficult for you to obtain finance.
There are no accurate figures on the amount of people that get turned down for a mortgage from a high street lender, but it is widely estimated that it is about 1 in 5. Generally this is due to minor misunderstanding and can often be resolved. But even after this it is estimated that one in eight people will not be able to get a main stream mortgage and have to go to a specialist lender.
Why Do People Get Turned Down For Credit?
There are a number of reasons and situations for which someone will be turned down for a mortgage. It may simply be that the applicant has put down some incorrect details on the application form. Another reason might be that your previous landlord did not bother to confirm that you used to pay the rent on time.
Another more serious reason that people get turned down for a mortgage is that they do not have enough credit points. When you apply for a mortgage the lender will carry out a credit check on you.
You will gain credit points for a number of reasons for example if you have had the same address, job and bank account for a long time. Also people that keep up to date with repayments will gain points as well. But you will lose points if you have defaulted on debts, fallen behind with bills, have CCJs or have been made bankrupt.
What Can You Do If It Happens To You?
If you do get turned down for a mortgage or loan the first thing you should do is find out why. If you did fail a credit score the lender may not tell why, the credit agency that they used will know. It may be a mistake on their part, or an old default that should no longer be on your file.
The best thing to do is to get hold of your credit record from one of the agencies. The three main agencies are Equifax, Experian and Call Credit. If there is some kind of mistake then you can get it sorted.
Another reason that you may get declined a mortgage or loan is because you have not built up enough credit history. If this is the case then it might be an idea to take out a couple of good credit cards (there are always good deals to be had). Use them to purchase things and pay them off straight away.
What If You Have Had Serious Credit Problems?
If a high street lender turns you down for a secured loan or mortgage, then you will need to look towards the sub prime or bad credit market place. These specialist lenders have a vast array of bad credit loans to cater for people in a variety of different situations. Whether it is just a defaulted credit card that happened 12 months ago for £300 or a recent CCJ for which you still owe thousands. Whatever your situation is the chances are you will be able to find a lender.
Generally the worse your credit history is the higher the rate of interest you will pay, this is because you pose a higher risk to the lender. For example if you have two CCJs you will pay higher rate than someone who has a single default. The good news is that you have plenty of choice, there are thousands of deals out there for people with credit problems.
The easiest way to find a deal and suitable mortgage or loan product is to use a broker. The broker can carry out a credit search and based on the results they will be able to determine what your best options are. The majority of the bad credit lenders are not household names. Some of these lenders are owned by American companies and others are subsidiaries of high street lenders.
Getting The Best Deal
As previously mentioned the worse your credit history is, the higher the interest will be. If you have a light bad credit history, then as long as you keep up with repayments then you might be able to switch to a mainstream deal after two years.
If you have heavy bad credit history then you may have to wait three years before switching lenders. So for this reason it can be advisable to avoid products that tie you in for long periods.
So when the deal comes to an end, and you have kept up with your repayments you should look to move to a standard deal, possibly with a high street lender. Hopefully by this time your bad credit history will be long behind you.
By: Chris James