So You need to Apply for a Loan?
It’s important not to apply for several loans at once when you are researching the loan market. Every time you apply for a loan this leaves a note on your credit file and if you make multiple applications it can look like you have been refused by multiple lenders. New lenders looking at this could assume that other lenders are refusing you and so have an easy decision to make in also turning you down.
The best way forward then is to try and get loan agreements in principle without having the full credit search. Then compare whats on the table and apply for the loan that bests suits your needs. If a lender turns you down then you MUST find out why. Lenders are not required by law to tell you why you were refused but in reality most lenders will give their reasons. It is vital to get the reason for refusal and check the reason is valid before you consider applying for another loan.
Lender’s requirements. A lender needs to be as sure as possible that you can handle a loan responsibly and therefore if you have not borrowed money in the past you may find it difficult to get the best rate available. This is because your lack of a borrowing track record makes it hard for the lender to judge how reliable a customer you might be.
If you can show that you are capable of managing your money properly, maybe by having a credit card and a mobile phone and keeping them in good standing then possibly this might bring the best rate loan offers closer to you
One thing you can’t be when applying for loan is overstretched financially. Your credit records are there for all lenders to see and they can see immediately what your monthly commitments are and also how you have been handling those commitments. They can also see your credit limits so it’s a good idea to cancel any unused credit cards as those low limits could put a lender off you. If other lenders are only allowing a little then why should the new lender have confidence?
Explain your special circumstances. If you have a bad credit record, or you are currently having some financial problems, it makes a lot of sense to seek advice rather than simply borrow more. If you have ever missed repayments in the past they remain on your credit record for at least 36 months. IVAs, Court judgments and bankruptcies stay on the record for at least six years.
If Special circumstances have affected your performance on a finance agreement in the past then explain these circumstances. For instance if you have been ill or had an accident and this affected your earnings and therefore your ability to pay temporarily you can make a note on your credit file and lenders will certainly consider this when looking at you for a loan
ALWAYS steer clear of any organisation that claims it will repair your credit record - this is simply NOT possible unless a serious mistake has been made, in which case you can easily fix it yourself. Certainly never pay any company for so called “credit repair”, any type of debt advice or rescheduling of debts.
There is usually a good reason for credit being refused to you. If you are having difficulties then the wisest step is first of all to review your spending. A good mover could be to consult with a debt councilling service.
One very simple and quick way to improve your credit rating is to register on the electoral roll if you aren’t on it already. Credit reference agency Experian tells us that lenders use the electoral roll as a precaution against fraud, to help check that you are who you say who you are and live where you claim to live. If you are registered at a different address to the one on the application form, or don’t appear on the electoral roll at all, they may ask for proof of residence or could simply turn you down.
Tags: Reality
