In the present day, having a poor credit rating can really hold you back in life. Whether you are looking for a car, a credit card or you want to get a mortgage to look after your family, you will find that your credit rating is very important. This means that things that you did years ago could impact on your future. In many ways, this is quite unfair. A person’s credit rating doesn’t really say anything about the person today; it merely indicates who they used to be. A person with a poor credit rating may have a lot of income in the current day, but if a credit check goes against someone, they will find that they can be blocked from doing the things in life that they like.
This is why it makes sense to improve your credit score. However, you will find that there is a big problem with this plan. To improve your credit score, you want to pay back a loan or credit agreement in full and on time. If you are unable to obtain credit because of your credit rating, how are you supposed to obtain credit to pay back in full to improve your credit rating? This creates quite a frustrating situation for people with bad credit, but thankfully, there are solutions.
Not all Finance Solutions are of benefit
Before you feel overjoyed at the fact that there are solutions for people with poor credit, don’t get too carried away. Not all of these solutions are of great benefit to you. While having a poor credit score can act as a barrier to obtaining finance, it doesn’t completely rule you out. However, it will mean that you end up paying a higher fee or having to accept a higher level of APR to obtain finance. This is the way that the lending company justifies handing out a loan to people with a poor credit rating.
To a company that provides loans and finance, a poor credit rating represents a risk. It suggests that this person may not be able to pay back the loan, so the company needs compensation for taking a risk in providing the loan. This is why the APR imposed on these loans, normally payday loans, are extremely high. The associated APR of payday loans is extortionate and there is a great deal of pressure being placed on these companies to lower the level of APR associated with them. This may work on some companies but you’ll likely find that some firms will ignore the pressure or will just decide to not offer the loan because they will not think that the risk is justified.
If you miss Payments, you will Harm your Credit Rating
You may think that taking out a payday loan and paying it back quickly is a smart idea. If you can meet the payments and there is no penalty for early payment, it isn’t a bad idea, but you are placing yourself at great risk. If you miss a payment or you are late, you will find that you end up owing a considerable amount of money. This is why so many people default on their loan or end up having to roll their loan over, which sees them ending up deeper in debt. It also leads to their credit rating being even more untenable. This is why you should avoid payday loans as a means of improving your credit rating because it can actually make your credit rating worse.
If you are serious about improving your credit score, you will find that taking out a guarantor loan is likely to be the best solution for your needs. As long as someone is willing to vouch for you to a guarantor loan company, you will be able to obtain a loan at a much more attractive rate of APR. This has to be seen as good news for people with poor credit. It is important that you find someone who understands the responsibility involved with guarantor loans and that they are willing to accept this responsibility from you. If you do have someone who is willing to act, you can benefit from a loan now and you should find that meeting all of the payments and requirements of your loan will help you to improve your credit rating for the next time you need to apply for finance.
When it comes to improving your credit rating, a guarantor loan makes perfect sense.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.