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No Credit versus bad Credit

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No Credit versus bad Credit

Mist people think they can get any kind of loan they desire with high credit score while some think low credit scores would limit their ability to get loans. High credit score simply means that one gas built a history of frequent borrowing from banks and lenders. Credit score dies not measure how financially responsible an individual is, and it is a three-digit number that measures the amount of debt an individual incurs for a particular period of time. Lender’s and banks use this score to access one’s credit worthiness. It helps them decide if one qualifies for a loan or not and also determine the interest rate that will be given to the individual. They do not proceed to check people’s bank statements when they apply for loans or go through their spending, emergency or retirement savings.

Low credit score refers to a credit rating that falls within 300 to 579 and there are a number of things that can give one a bad credit rating which should be avoided. They negatively affect your credit score and show lender’s that you have history of mismanaging money. Example of the things that can give you bad credit rating include borrowing more than 30% of the credit made available to you against an existing account. Making late repayments if loans, utilities, or allowing you account to move into collections and filing for bankruptcy can give you negative credit ratings. Bad credit score can prevent you from getting a loan from a lender so you can pay for car loan or mortgages. When creditors access your credit record and find such things, they become discouraged from giving you a loan.

No credit score does not mean you have borrowed excessively or that you have been declared bankrupt.  It simply means you have not been borrowing, therefore lenders and banks do not have records they can make reference to when you apply for a loan, so they might end up rejecting your application. There are certain factors that can contribute to one having no credit score and some of them as as follows: not taking a loan inthe past two years, not being listed on any active credit account, having only one recent application for credit.

To build your credit history, you need to start taking out loans such as car loan, credit card loans and ensure you make payments each month so you can build a credit history and make it easier for you to qualify for a mortgage. Poor decisions on borrowed money can make it extremely difficult for you to borrow again, so be careful.

Whether you have a bad credit history or no credit history, both of them meanyou do not have a reliable credit history and thiswill cause difficulty when you want to take out a loan because with both of them, you are a risk, as lenders would not have any proof that you will pay.

If you do not haveany credit, your credit score will be zero and it is not the same as having a bad credit score. Although bad credit and no credit history might cause you to experience difficulties when you want to get a loan, having no credit is always better because lenders do not have any evidence that you will not pay and are unsure about that. To build a credit history, you can get a secured credit card which is secured by a deposit you pay when you open the account and the credit limit is usually equal to the deposit you paid, this protects the lender from the risk of you not repaying. You can as well apply for credit builder loan which do not require a good credit score for you to apply. You just need to have sufficient income each month to make the necessary payments.

Consider applying for a Credit-Builder Loan. Unlike normal loans, you do not need a good credit score in other to apply for a credit builder loan. You just need enough income per month to make the necessary payments. You won’t have access to the amount you borrowed unless you pay your monthly installments and your timely payment are reported to credit agencies which gives you a good credit score.

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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