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
Latest News
 Hürriyet | Investment-Grade Credit Risk Index Rises to Record in Europe Bloomberg - Credit-default swaps on the Markit iTraxx Europe index of 125 companies with investment-grade ratings climbed as much as 7 basis points, and was 5 higher at ... Credit insurance for riskier EU issuers hit Crossover Spread Still Wide Bond Risk Falls as Fed Extends Emergency Loans to Ease Credit |
 Washington Times | SEC Approves New Credit-Rating Rules Wall Street Journal - "The big three credit-rating firms have failed investors' and played a significant role in the current financial meltdown, said SEC Commissioner Kathleen ... SEC strengthens credit rating agency rules SEC adopts new rules for credit-rating agencies US SEC strengthens credit rating agency rules |
 BBC News | Credit Suisse Cuts 5300 Jobs New York Times, United States - By BETTINA WASSENER HONG KONG — Credit Suisse announced Thursday it would cut 5300 jobs — 11 percent of its global workforce and Nomura of Japan said that ... Credit Suisse Posts Loss, Cuts 5300 Jobs Credit Suisse to Eliminate 5300 Jobs After Losses This Quarter Credit Suisse to cut 5300 jobs after $2.5 billion loss |
Avnet, Inc. to Present at Credit Suisse 2008 Annual Technology ... MarketWatch - chairman and chief executive officer Roy Vallee will present at Credit Suisse's 2008 Annual Technology Conference in Scottsdale, Arizona this morning at ... Microchip Technology to Present at the Credit Suisse Annual ... Brooks Automation to Present At the Credit Suisse Annual ... |
Smithfield Climbs After Addressing Credit, Liquidity Concerns Bloomberg - Rising grain feed costs helped push Pilgrim’s Pride Corp., the largest US chicken producer, to breach its credit covenant and seek bankruptcy protection ... |
Nonbank Firms Like Avis Seek to Broaden US Relief on Credit Wall Street Journal - By JESSICA HOLZER WASHINGTON -- Commercial and industrial companies are clamoring for more federal action to unlock credit markets, saying that moves to ... Fed extends key credit programs through April 30 Business Highlights Firms Seek More Action to Unfreeze Lending |
Photronics Amends $155 Million Revolving Credit Agreement and ... MarketWatch - Under the amendment, the Company has through December 12, 2008 to finalize revised terms and conditions of the credit agreement. The Company also announced ... |
 International Business Times | Research and Markets: Verdict on the Credit Crunch 2008 Examines ... MarketWatch - It analyses the success of the discount retailers and looks at the wider impact of the credit crunch in other countries through a focus on Eastern Europe. ... Research and Markets: Credit Crisis Brings Telecom to a Turning Point Research and Markets: This Essential 2008 Report on UK's Non ... |
Egypt's EDB Bank gets $20 mln credit line Reuters - CAIRO, Dec 4 (Reuters) - Abu Dhabi's Arab Trade Financing Programme has extended a $20 million line of credit to Egypt's Export Development Bank EXPA. ... |
You can take steps to repair credit Baltimore Sun, United States - Tough economic times might push even more desperate consumers into the hands of unscrupulous credit repair firms. That worries Maryland regulators, ... |
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