In this article, we explore why high street banks no longer lend to anyone with a poor credit rating, and then give sensible affordable loan options for you.
High Street Banks protecting their interest only
It was not too long ago that banks were seemingly falling over themselves to offer new and current customers a loan.
However, thanks to a combination of bad decisions and a failure to repay outstanding debts, banks and building societies are these days far more choosy about who they are prepared to lend to because they do not want bad debts to leave a significant dent in their profits.
This new attitude from UK mainstream lenders has clearly made obtaining new customers a little more difficult and they are therefore trying harder than ever to retain their current ones.
How do they decide?
Credit decisions are based on the lenders wish-list of what makes a profitable customer and right at the top of this list is the applicant’s credit score.
The following article explores some of the factors which are taken into account when creating a credit score and offers advice on how to check it:
How to check your credit report – Money Advice Service
You are no longer a person – but a credit rating!
The past decade has seen a complete shift in the attitude regarding lending and mainstream lenders now focus entirely on ‘rating for risk’.
This means that every bank and building society will use your credit rating to not only dictate whether they will accept your application but also to decide which APR (Annual Percentage Rating) they are prepared to offer.
So let’s look at your credit rating
There can be no escape from your credit record. Your credit record contains accurate details regarding your financial history. Some of the details contained on your credit record include:
- Outstanding Debt
- CCJs (County Court Judgements)
- Missed Payments
All of which will serve as a red flag to potential lenders.
Whilst banks and building societies are still extremely cautious about whom they will lend to, the landscape is beginning to change.
It is as much about ‘will you make the lender money’ as it is about risk. This is the attitude that has been adopted by an enterprising group of ‘bad credit’ lenders who are changing the landscape of borrowing in the UK.
Still a little unsure what actually makes someone a bad credit risk? Clearscore, Experian & Equifax are the best to find out more.
So what new options are there?
If you have received the cold shoulder from your bank, there are still options for you to borrow money. However, some are better than others ;
One To Avoid! – Payday Loans
The highest profile of all poor credit loans, due to a combination of prominent TV advertising and a huge amount of negative publicity, payday loans offer a short-term borrowing solution but can be incredibly expensive.
- Should be viewed as a last resort
- Extremely high APRs
- Expensive charges if payments missed
- Can ultimately make financial problems worse
Guaranteed loans are a unique type or poor credit unsecured loan which requires a third party (typically a family member or close friend) to back up your loan application.
- Perfect for anyone with a poor credit rating
- Up to 10 times cheaper than payday loans
- Available for up to £10,000*
- Repayable over up to 5 years*
- No early repayment fees*
- Can be used to repair a poor credit rating