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My Credit is Bad - [BACK] Unless you have been residing on a desert island with no contact to the rest of the world, you will have a credit report. Data regarding utility bill payments, credit cards and mortgage payments, your registered address and even financial associates are placed on your credit report in an attempt to gather together a sufficient amount of information to be able to create a good judgement as to how dangerous a potential customer you are when you go shopping for your next mortgage, loan or phone. A credit score is generated using a mathematical formula and then comparing of the consumer's spending and credit history with the habits and credit histories of other consumers. The resulting figures are then converted into a rating that is used by probable lenders. Lenders use this rate to assess how much of a risk it is to lend money to someone. A bad credit score will reflect a history of failed repayments on credit cards, loan schemes, outstanding bills for home utilities, missed mortgage repayments and overall bad money management. A good credit score will reflect the reverse of these habits. A person with a bad credit score is likely to be refused loans, finance and credit cards or, if their applications are accepted, they are more than likely to pay higher rates of interest than individuals with good scores. This is due to the fact that their score tells prospective lenders to the chances of them being in a higher risk category e.g. they are more likely to fail on repayments to the lenders themselves. Over time, it is undoubtedly possible to positively influence your credit report and hence boost your credit rating. For a person to enhance their score, it is wise for them to first find out what their rating currently is. Thanks to the 1974 Consumer Credit Act, it is now a statutory right for any consumer to get a copy of their credit rating. These can be obtained, for a minimal charge, from any one of the three major credit-watch companies: Callcredit, Equifax or Experian. This document can then be checked for any mistakes or expired incidents that may still be affecting the credit score. Money management is the next advisable step. A credit score can be affected favourably by simply making repayments in full and on time, making sure that outstanding bills are consolidated and paid off can also have a positive effect. With every debt and bill being paid off, the rating is steadily reversed, until it is able to become a good one. In the absence of available loans or credit to help them consolidate their debts, a large number of people with unfavourable credit reports turn to credit cards that might be offered to high-risk clients, by many banks. This may be a usable system, however only if it is managed properly and not allowed to deepen the spiral of arrears. It is better for them to be used as a means of support over short periods of time, with subsequent repayments being made in full so as to prevent incurring any unnecessary interest. Better credit ratings are also mainly issued to homeowners than tenants as this is considered to be a sign of stability. Likewise, employees are mainly scored higher than the self-employed. Credit card debt is thought to be very bad debt and as such is worth keeping to a minimum where possible. It’s advisable for those looking to stabilise a growing credit debt to move their balance in order to benefit from interest free introductory periods. Use a tool such as The Fool’s Credit Card Comparison to compare credit cards and find the best available or better still to find an unsecured loan and lose the credit card. If you must keep a credit card, according to the Motley Fool’s website, RBS currently offers an exceptionally competitive arrangement on their credit cards - 0% on balance transfers over 13 months plus 0% on purchases over the first 3 months. Ultimately, you will always be better off shedding the credit cards and switching to a personal loan. The Motley Fool can assist you to compare unsecured loans in a flash. A couple of great ones to pick from at the time of writing, for my person conditions were: Ultimately, you will always be better off shedding the credit cards and switching to a personal loan. The Motley Fool can assist you to compare unsecured loans in a flash. A couple of great ones to pick from at the time of writing, for my person conditions were:
* as of 14/09/2007 - source - The Motley Fool - Loans Comparison Centre [BACK] |
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