- Feel like you are living in a cage like these apartments in Beirut? There are ways to change your life, from moving to some green space to starting a business that your values can stand behind. But what can you do to get a better credit rating? Some tips that might help.
With the new year well and truly underway, you’re maybe thinking about or putting into action, green plans for the months ahead. Whether that’s doing your part to reduce your carbon footprint, purchasing a new bike so you can cycle to work instead of drive, or making your home eco-friendlier. No matter what your eco-plans might be, many may involve having the finances to achieve them. If you haven’t got the savings to do so, getting the right financial help becomes an important factor. This can be difficult at the best of times, even more so if your credit rating has seen better days. So, what can you do if you’re currently in a ‘bad credit’ position?
Why Do I Have Bad Credit?
Firstly, you need to understand what bad credit is and why you might have it. Bad credit describes someone who has a poor credit history and their current credit rating is very low. Having bad credit means if you apply for any type of borrowing, for example, a personal loan, when a lender proceeds to do a credit search they will see a number of negative issues on your credit file. This can mean in most cases a lender will decline your application. This is because of the risks involved for a lender, who preferably will want to accept applications from good credit applicants to ensure the loan is repaid.
If you have bad credit, it can be one of two things; either you have no credit history at all or you have a history of missed repayments, or defaults on loans, that have kept your credit score low. When a lender sees this information, it doesn’t particularly paint a great picture of trust that the same will not happen if they lend to you. Having no borrowing history leaves a lender with no information on whether you have good intentions to pay the loan back and no history of being lent to before. Part of the key to successfully applying for borrowing is to show a lender you can make the payments reliably and have the means to do so. If you have a history of not being able to do so, this is where many lenders will have to decline. What can you do about it then?
Bad Credit Loans Direct Lenders
The good news is, there is still hope if you are one of those people with bad credit. Maybe there is a negative mark on your credit file from a mistake you made months or even years ago that only happened once. Or maybe you struggled with making repayments on a previous loan due to a financial difficulty which is resolved, meaning you now have the affordability. There could be hundreds of reasons why you missed that payment in the past, which is why some lenders are willing to look at your finances slightly differently.
A bad credit loans direct lender will take into consideration the mistakes you may have made in the past and focus on what your finances are like currently. You may have lost your job at some point, meaning suddenly no income. You couldn’t afford to maintain any borrowing causing missed payments and huge impacts on your credit score. However, now you are working again and have plenty of affordability. This type of situation, although only for a temporary period in your life, will have lasting effects on your credit rating, ruling out many lenders who could normally help. This situation can be extremely frustrating, which is exactly why some lenders can specialise in bad credit loans to help.
With these types of lender looking at your current affordability, they can determine if you can afford a loan and offer borrowing that suits the situation. Whilst your credit rating will play an important part in getting approved, these lenders can be slightly more forgiving for any past mistakes you have made, as long as you’re out of that now.
Planning Your Affordability
The best thing you can do is before looking to delve into the loans market, work out the current state of your finances. By doing so you can very quickly see what you can and can’t afford. You’ll be surprised how often people may overlook doing this, instead apply for a loan which they cannot afford and act surprised when declined, or if accepted, puts them in a worse position. You may find that you have more affordability than you thought. On the other hand, you may see after looking at your income and outgoings that your disposable income is very low. Maybe those energy-saving home improvements can wait a little bit longer if so.
You should spend time detailing your current household income and exactly what your current outgoings are, including any existing debt and repayments. This is the most effective way to see what money you do have leftover to play with. Hopefully, after doing so, you’ll feel much more positive about your future plans. You may even be able to add to your plans; changing your car for an electric model for example. We hope you’ll be pleasantly surprised by what you find.
Do You Need Further Borrowing if You’re in Bad Credit?
This is another key question; do you need it? Depending on how the results of your income and outgoing comparison go, you may want to reconsider if taking out further borrowing is the best choice at this time. As honourable as making greener choices are, it can be expensive. The last thing you want to do is overextend yourself by taking out borrowing you could do without, especially if you are already in a bad credit position. Most lenders practice responsible lending, and if they don’t then they should. This means they will only lend to you an amount you can afford to pay, avoiding lending high amounts unless someone has the means for it.
So, if you already have a lot of existing debt, most lenders will see this and offer a loan accordingly, possibly decline if they feel you already have too much on your plate. This is designed to protect you and the lender from any future financial difficulty. The difficult part of having bad credit is climbing out of it. This can sometimes take a lot of time and effort to get into the ‘good’ zone. Sometimes though, it only takes a few changes to improve.
How Do I Get Out of Bad Credit?
If you have bad credit because you have never taken out any form of borrowing before, the best way to start improving your score is by taking out a small loan or low limit credit card. This way, you can start to build a credit history in small steps. If for some reason you do not have a bank account, you should open one; not only do most lenders require you to have one, but it is a quick way to start improving your score.
You should avoid applying for large amounts of money with bad credit. This is because there is a higher chance of being declined the higher loan is, with a lender needing more assurances to lend to you. The same goes with sending out multiple applications in a short space of time. This can only have a negative effect on your credit score if lots of lending requests are being made regularly. You should carefully consider the loan you want to apply for before proceeding. Is the amount you want more than you need? Can I easily meet the repayments every month? These are the types of questions you should ask yourself. Applying for the right loan for you at the right time is sometimes just as vital as your credit rating.
The best way to understand why you have bad credit is to actually check your credit report. A credit reference agency can show you what your current credit score is and what is currently affecting your score. For example, it may say you have missed some recent repayments, the wrong address is on your file if you’ve recently moved, or you have maxed out all your available credit sources, i.e the credit limit has been reached on your credit card. The idea is you can pinpoint exactly what is affecting your score and start to put into place actions to resolve it; identify and rectify.
Sustainable Green Finance
Making the world a greener place, in wider terms and in your own personal world, is not a straightforward process. It is expensive and can be time-consuming, but with a bit of guidance can be slowly achieved. With finance, to help you and many others when looking for a loan for personal or business purposes, there are initiatives in place to help make lending greener.
Green loans are a term you may have heard used where the objective is to create sustainable finance options that are eco-friendly. This means, if you are looking to borrow money that is going to be used for something that is good for the environment, green finance could be an option.
Taking out a loan for yourself that will improve your life as well as the wider world is the ideal solution. Taking out a loan to buy yourself an electric car instead of a petrol or diesel version is an example of green finance. Purchasing solar panels for your home using a loan is green finance. Anything you purchase with a loan that is helping the wider world can be termed as green finance, so it’s easier than you think to do your part. Even with bad credit, you may still find you can achieve your green ambitions this year, as long as you can afford to do it.