When you are looking for a line of credit, whether it is a payday loan, or personal loan, credit card or other type of credit, there are many different things that are looked at by the lender to work out whether or not you are a responsible borrower. Credit ratings and your credit score have become such an important part of our life, in all aspects of our life without even really realising it. A credit score does not only play a big part in whether or not you are given credit by a lender, it also dictates the type of credit you can acquire, the interest rates attached to said credit and the repayment terms in length. If you have bad credit, a loan can still be found through an adverse credit lender, but it is always worth looking at all available options and the different factors that make up a credit score, to see where you can improve.
What is your credit score?
Your credit score is something that builds up over time and takes into account the financial transactions you make and the credit agreements that you have in place. There are a number of credit agencies that hold information on you. This information includes your address and past addresses, any legal action that have been taken against you relating to debt, all lines of credit that you have taken out in your name, as well as the repayments you have made and missed. Your credit score paints a picture of how reliable you are as a borrower. If you pay your rent on time every time, make your mortgage payments, pay your phone bill, pay off your credit card every month, this will all add a positive score to your credit file. If you miss payments, rack up debts and live in a cycle of debt repayments, your credit score will be poor, and you will struggle to gain credit in the future.
Is it important to be a homeowner to have good credit?
Although it isn’t vital to own property to have a good credit score, it does definitely help. If you own a property, you have an actual asset listed against your name that makes you a much more attractive proposition for a potential lender. If anything goes wrong with a secured loan that a homeowner takes out, the lender knows that the asset is available to fall back on in the worst-case scenario. Owning a home, therefore, does put you in a much stronger position when looking for a loan of any kind, but it does mean in the worst-case scenario an unpaid debt can be used to repossess your home.
What if I’m a renter?
If you have bad credit and you are a renter, you might worry about your credit score and potential to find credit with any lender. Do not worry, there are adverse credit lenders on the market with the financial services to help those who have a poor credit history and do not own a home. There is help available for everyone, it is all about seeking out the responsible lenders that can offer you help when you most need it without placing you in further financial peril.