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

---

Ebooks, Scripts, Websites, and more...

Adsense websites

Bankruptcy Myths Busted

The average American knows very little about bankruptcy. Most people... Read More

Building Good Business Credit After Bad Credit

Can you establish good business credit if you have bad... Read More

Beware of Falling Minimum Payments

If you opened a credit card statement recently and were... Read More

What is the Check 21 Act?

Check 21 is the common name for the Check Clearing... Read More

5 Killer Steps to avoid Credit Card SCAMS!

In August, 2004, the Federal Trade Commission issued their findings... Read More

Which Citi Mastercard Is Right For You?

You've decided to apply for a Citi MasterCard, but with... Read More

Student Credit Cards 101

Almost all students have and use student credit cards. Some... Read More

Borrowing on a Credit Card

One of the easiest ways to borrow money of a... Read More

Bailiffs & Council Tax - Knowing What To Do

This article is about bailiffs who may call trying to... Read More

How to Save Money on Your Credit Cards

Credit card companies make their money on the 85% of... Read More

How Creditors Measure Your Credit Rating

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

Dealing With A Collection Agency

Step I - Selecting A Collection AgencySelecting a credit collection... Read More

5 Ways To Raise Credit Score

It's not as hard as you think to raise credit... Read More

How to Order the Right Credit Reports to Repair Your Own Credit

In this week's article, I am going to offer some... Read More

Credit Card Security Advice

Which of the following is the biggest threat to your... Read More

Why Your Credit Score is Important

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

A No-Brainer Way Of Getting Credit And Credit Cards

What Is Your Credit Rating Now?If you have any charge... Read More

5 Steps You Can Take to Get Paid!

There are always some companies that have past due invoices... Read More

Repair Your Credit - The Right Way!

How to Repair a Bad Credit Rating?The Right Way!If you... Read More

Credit Report ? How to Improve Your Credit Score

One of the great mysteries of life is how the... Read More

How To Start A Second SEPERATE Credit File!

Your personal credit file is separated from those with the... Read More

10 Ways To Protect Your Financial Identity Being Used For Someone Else?s Shopping Spree

Someone impersonating you could be spending your hard-earned money.Impossible! Not... Read More

Understanding Your Credit Score

When you apply for credit one of the first things... Read More

Which Credit Bureau Should I Use To Check My Credit Report?

There are three main credit bureaus in the United States;... Read More

Commercial Collections: Business Finance Booster Shot

Commercial collections: fixture of the new B2B cultureIf you're in... Read More