All your interactions with credit institutions end up in a database that is common for most banks. Information about all your credit transactions (including late payments) is stored in the Credit History Bureau for 10 years.
All customer actions related to loan servicing have their own “price” in credit rating points. Overdue payment, write up report, provide incorrect data, close the loan ahead of schedule – minus in credit report. In fact, the early repayment of the loan for banks is even worse than everything else. From those who are late with the next payment, the bank receives additional profit in the form of fines and penalties, and “early repayment clients” do not help earn extra funds, paying only a small part of the interest.
The result is the following: the rating in the “red zone” — there will be a refusal. In the “yellow zone” they will give a loan, but the amount will be less, and the rate will be higher than expected. The bank will try not to miss a client with a high credit rating. If he starts to assess the client for too long, he will be offered a more favorable rate in, an increased interest-free period and other efficient promotions in another bank or credit service.
Have all the banks refused? Are there other lending options?
If there are no mistakes, and you really missed payments (or for other reasons lowered your credit rating), then the credit rating can also be corrected. To do this, you need to take out payday loans and pay them back on time. The same may be with clients with a zero credit rating.
However, there are two problems here. First, this option is suitable only for those whose credit score is in the “yellow zone” (they give loans, but a smaller amount and at a high rate). The second problem is a rather long process, it can take years. What should those who are in the “red zone” and who need a loan urgently do? Where can I get a loan with a bad credit history?
The options are as follows:
- Try to get a credit card. Banks issue credit cards more readily than ordinary personal/consumer loans: the requirements for borrowers are softer, so there is a chance, even if you have some problems with your credit rating. The less popular a bank is, the more loyal it is to the “penalty takers”. There are disadvantages to such a solution. It is not by chance that banks issue their credit cards to everyone – the interest is higher and there are more commissions. This option is suitable if you need to get extra cash before your paycheck. A card with a large limit will simply not be approved for you. Banks increase credit card limits gradually and only to customers with proven solvency;
- Pawn the valuable things. Such organizations use their own risk assessment methods. Strictly speaking, the risk of non-return is not so important for the pawnshop, because in this case it becomes the owner of the valuables left as collateral. It can be household appliances, electronics, jewelry, coins made of precious metals or other valuable things. On average, the amounts issued by pawnshops can range from 50% to 90% of the collateral value. Even for those who need cash advance urgently, a pawnshop is not the most popular choice. The reasons are obvious: they will not give much there, the loan amount will be less than the real collateral value;
- Contact a payday lending service. Online direct lenders are different, but most of them are loyal to borrowers with a bad credit history. If you are not a malicious defaulter who took out a loan and is now hiding from banks, then the probability of getting a loan from an online lender is very high. Low income? Not a problem. Bad credit rating? It’s not a big deal. Payday services approve up to 95% of all applications.
Moreover, no certificates will be required from you. To apply for a loan, only one identity document will be quite enough. Recently, in most direct lending unions, a payday or personal loan can be issued online. Such organizations also hold promotions that allow you to significantly save on interest.
What do payday clients need to know about? They should understand that all of these efficient terms are balanced by interest rates. The higher the risk, the higher the rates, otherwise it would not be a business, but a charity. But this method allows you to get the amount that you need, and not the one that banks are ready to approve.
As mentioned above, online lending services are different. Thinking about how to get a loan with a bad credit history? Then you should look at microfinance organizations that have been working for a long time with simple and transparent terms.
Restoring the credit history – some recommendations
Have you never had any late payments and other arrears, and the bank still refused a loan? Such cases happen, including due to the human factor. If you find yourself in the “red zone” by mistake, then you should try to improve your credit history.
To do this, you will need copies of documents confirming the fact of a bank error – for example, certificates of full loan repayment, police reports on the fact of a fraud case, and others. The documents together with the statement of the requirement to restore your credit report must be sent by registered mail to the Credit History Bureau.
Employees of this institution will be required to review your application within a certain period of time: to verify the data provided, to make a request to the bank. If the data you provide is correct, then within 2 weeks the credit history bureau will have to make changes to your credit history or prove that its deterioration is justified. Within 30 days after submitting the application and the package of documents, the credit bureau is obliged to notify you of changes to the credit rating (or refusal of these changes).
