Credit Scoring

Credit Scoring

How to Maintain Good Credit?

Loans have become a popular commodity not only in the UK but anywhere in the world. When people are short of cash, they turn to short term loan lenders. These loans are usually in small amounts, from £100 to a few thousand. One reason why this type of loan is popular is the ease of getting one. You can apply for a loan today and get the funds a few hours after submitting your application.

In most cases, you do not have to visit the lender’s office. You apply online and get the funds online.  However, some lenders may conduct a credit check on you before they approve your loan. Having good credit would lead to a quick approval and release of your loan, while a bad credit history may result in the rejection of the loan application. For borrowers, having an excellent credit score or rating is very important for a successful loan application.

Ways of Keeping Good to Excellent Credit

When you use a credit card, open a bank account, or buy something on credit, credit reference bureaus stat to monitor your credit behaviour. Some people think that having no debt at all and purchase cash all the time can result in an outstanding credit rating. Only a few are aware that to build a credit history, one must establish a credit record that is good to excellent. In the UK, there are credit reference bureaus that keep a record of peoples borrowing habits. These are TransUnion, Experian, and Equifax. These agencies work with banks and other financial institutions, credit card companies, building societies, mobile phone companies, and other retailers.

Whenever you have credit transactions with these business entities, these agencies would start monitoring your borrowing habits.  A credit score of 721 to 880 will give you a fair credit rating while a score of 881 to 960 has good rating. A good credit score will open the door of all lending institutions for you.

Here are the best ways to maintain a good credit rating.

Always Pay Your Debts on Time

Paying your debts before or on the due date will do wonders to your credit rating. The credit reference bureaus keep a record of your payments. You might think those small debts do not matter, but they do. Avoid neglecting to pay small debts and utility bills, big or small.

Keep Credit Card Balances Low

Many credit cardholders use their cards to the maximum, but this habit can hurt your credit rating. If you have a credit limit of £5000, spend only a maximum of 30% or lower. Maintaining a low balance will show credit card companies that you know how to manage your money. You can expect a good credit rating from them.

Have Few Credit Accounts

Credit cards are helpful if you happen to run out of cash. However, use them sparingly. Having several credit accounts and using them to a maximum level would show your spending habits. It is fun to shop when you have thousands on your credit account. Nevertheless, this can tempt you to spend more than what you can afford at the moment. Before you know, your debts have accumulated to a point where you can hardly pay your bills on time. Your credit score would plunge and you will have difficulty building it again.

Watch Out for Errors in Your Credit Report

You can easily access the websites of credit reference bureaus. Regularly monitor the entries in your credit record. A small debt that you have already settled, but were not yet marked as paid can negatively affect your credit score. Once you see the error, you can dispute it and ask for correction.

Credit Scoring

How to Borrow Money with a Very Low Credit Rating?

 

Almost everyone will have to borrow money, at one point or another. When it comes to getting smaller amounts of money, people tend to borrow from family or friends, however, larger expenses may require getting a fully-fledged loan. This is not a problem for individuals who have had great relationships with banks and have slowly built up their credit rating. This having been said, not everyone has a perfect credit score and this means that some people simply do not have access to proper banking services.

Luckily, banks are not the only ones who can offer loans. While they are the most popular choice, there are other ways to legally borrow money, regardless of one’s credit rating. Please note that we won’t look at traditional lenders such as pawnshops or community lending associations. Instead, we will talk about reliably borrowing money online.

The Main Online Lending Platforms

There are 3 main ways through which individuals with low credit ratings can borrow money online:

P2P Lending Websites

P2P lending websites work by putting lenders in contact with borrowers. The platform itself only oversees the transactions, ensuring that all parties follow the terms and conditions. Generally speaking, these websites allow users to buy moderate amounts of money (up to £2,000), for up to 60 days. However, these terms can vary from one platform to another.

Pros

  • The platforms do not perform credit checks or report the loans to credit registers;
  • Very few requirements for signing up;

Cons

  • It can take up to one week to have your loan request approved;
  • Loans are limited to certain amounts;

Online Lenders

These are similar to banks, in the sense that they regularly come up with specific deals that they then market to anyone interested. However, they do come with several advantages when compared to traditional lenders. First of all, they do not perform any credit score checks. This enables individuals with low credit rating to borrow money without worrying that they might not be eligible.

Pros

  • They are a good alternative to banks;
  • No credit checks are performed to determine if the user is eligible or not for a loan;
  • Can be used to borrow large amounts of money;

Cons

  • The loans come with higher interest rates than those from banks;

Lending Apps

For the Android as well as the Apple Appstore are filled with apps that enable people to get micro-loans. These apps are great because they only require proof of identity, proof of address, and an active bank account to work. Furthermore, requests are processed instantaneously, turning them into useful tools for situations when you need a few extra pounds to pay a utility bill or the rent.

Pros

  • They are an easy way to borrow money in a matter of seconds;
  • Low-interest rates;
  • Great substitutes for credit cards;

Cons

  • Only suited for borrowing small amounts of money;
  • Most apps are riddled with ads, making it difficult to navigate through the menus;

Each of these platforms is useful in its own right and all of them can be used by individuals who have low credit scores. Please keep in mind that none of them performs credit score checks, however, you will need an active bank account to get the loans. This having been said, the money that you borrow from the apps will not show up on your bank statement as a loan, but as a regular transaction. Furthermore, all three of these types of platforms are heavily regulated by the government, so your personal and financial data will not be disclosed to third parties without your consent.