Getting a loan with a bad credit history is generally not a problem — some microfinance Institutions (MFIs) are ready to transfer funds online.
What is a credit history and why it is “bad”?
Credit history is a set of records about all the debts of a person and his/her relationship with creditors. It is stored in a special organization – the credit history bureau. If the payer made a delay or completely stopped payments during the loan service, this is recorded in the credit history.
Information about frequent violations of the loan agreement negatively affects the quality of the credit history, and it is called “bad”. A bad or “low-quality” credit history can be a reason for denial. Responsible borrowers who repay loans on time, on the contrary, have a higher chance of getting a new loan on favorable terms.
In order to understand how a story becomes bad, you need to know in detail the process of its formation.
How is credit history made?
To understand how bad credit history can become, you need to know the specifics of the process of its formation.
This happens when a person first applies to a bank for a loan. At the same time, he or she agrees to receive information about him-/herself in the credit history bureau. If there is a credit history, it is transferred to the bank. If it is not present, the request initiates the formation process and becomes its basis.
What can affect your credit history?
Most often, a bad credit history occurs due to overdue payments on loans. The longer the delay, the worse the quality. Even a one-day delay will lower your credit score. However, one or two small delays cannot ruin your credit history. For it to become really “bad”, you should have a lot of delays for more than 29 days.
Therefore, the best option is to carefully comply with the borrower’s obligations and not go into conflict with the lender.
Also, too frequent requests for loans can negatively affect your credit history, which can be used to understand that a person lives in debt and repays previous loans with new ones. That is why experts do not advise sending applications “fan” to all the banks you like in the hope that one of them will approve it. The quality of credit history will suffer as a result, and you will have to forget about new loans for a long time.
How can I check my credit score for free?
Before you apply for a new loan, it is recommended to make sure that the credit history does not present any surprises and will not cause rejection. The law allows a person to request their credit history from the credit history bureau once a year for free. You can do this in a variety of ways: in person, by coming to the office, online on the website, by sending a request to the bureau by e-mail, or a simple letter certified by a notary.
The easiest way is to visit annualcreditreport.com to get your free credit report. You can check it once every 12 months.
I have a bad credit history: what should I do?
There is only one way to improve your credit history — take a loan and successfully repay it, fulfill all the conditions of the lender. This is the best solution for those who plan to use the services of various microfinance organizations and banks in the future.
But what if the story is already ruined and you need money so bad?! The only way is to contact one company after another trying to “negotiate”. Many microfinance institutions are actually willing to negotiate terms with borrowers even if they have a bad credit history.
What can increase the chances of loan approval:
- Proof of income. Despite the delays, having a job and a steady income can be a very good advantage. This is what lenders look at first — if you have a source of money, then you will have something to give the loan;
- Registration. If you have a permanent registration, then the lender will be able to contact you at any time;
- Communication with the lender. This point is very important. Get in touch with the decision-makers in this particular company and make contact. Explain why you should be given money, despite the bad credit history.
How to fix bad credit with payday loans
To get approved, it is important to provide truthful data. Microfinance institutions are ready to give you money without checking your credit history, your income, do not call to work to make sure that you have an official income, do not contact guarantors. The loan decision is made within 30 minutes. Take several small payday loans (one after another) to fix your credit history. Never delay payments and be a responsible borrower. However, if the delay is repeated, you can hardly expect to get approved in the near future.
Prevention of bad credit history
To avoid problems with lenders, you should work according to the rules established by banks. There are several ways to leave your credit history unblemished for banks and financial institutions:
- Provide correct personal data. If the borrower’s information seems suspicious, the bank may make a negative decision;
- Avoid delays in payments. The longer the delay and the higher the loan amount, the more difficult it will be to get a new loan;
- Contact the bank if there are problems. The bank has several tools to work with borrowers who have problems. In particular, this is a refinancing program or simply a program for working with difficult clients.
But if the story is damaged — it can only be corrected with the help of conscientious payment of new small loans. You can take a small-dollar loan and then repay it in about six months. A credit card also helps to fix the problem.
Summary
- Even a terrible credit history is not a hindrance to getting money;
- Proof of income is a very important detail for any lender;
- You can improve your credit history with the help of payday loans;
- Communication and individual approach can be the key to making a decision.