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Bad Credit Loans
Bad credit is caused by
a number of things. The primary cause of bad
credit is bankruptcy. Typical bankruptcy is an eleventh
hour sort of deal for most people. It is the final solution to serious
debt problems. However, a bankruptcy, whether it clears everything
or simply reorganizes your debt for you so you can manage it, lasts
for seven years on your credit record. It is a major signal to lenders
that you are not to be trusted with loans. As a result, it can cause
a very poor credit score. Another primary cause of poor credit
is making late payments on a regular basis. It signals to most lenders
that you are simply untrustworthy of making your payments on time.
That makes you a high risk customer. The later you are with your
payments, the lower your credit score will be.
Even if you have bad credit although you may still
qualify for a bad credit loan. A bad
credit loan is a good option for those who cannot qualify
for regular loans. They come in many forms including mortgages,
car loans, debt consolidation loans, and fast cash loans. Deciding
which bad credit loan is right for you will, of course, depend on
your purpose for getting the loan.
If you're looking to get a bad
credit debt consolidation loan, you can do this one of two
ways. First, you can get a secured loan by offering your home as
collateral. This does, however, mean that if you screw this loan
up, you will lose your home, no questions asked. You can also get
an unsecured loan, but these can be a bit harder to qualify for,
and you will not be able to borrow as much as you can with an unsecured
loan.
Lenders loan money to people with poor credit
for several reasons, but one important thing to remember about bad
credit loans is that their terms are often stiffer than regular
loans. Lenders will typically charge much higher interest rates
on any type of bad credit loans. This not only makes your monthly
payments higher, it also makes the total amount you will owe the
loan company substantially higher.
Motley Fool
Fix Your Credit, Reap the Profits
Wednesday February 14, 2:28 pm ET
By Mary Dalrymple
Once upon a time, when I was younger and less financially
obsessive, I missed a credit card payment. I had just moved to a
new state, and in the chaos I didn't even realize that the bill
never showed up.For years, that single late payment hung on my credit
report like bad onion-and-garlic breath that no amount of mints
could cure. Finally, this year, it disappears. I can't quantify
the impact that late payment had on my credit score or my interest
rates over the years, but it probably wasn't good.
Winning the good credit game takes tortoise-like patience,
and it can be very frustrating for any financial hares who want
to quickly erase their poor marks. Credit errors can stay on your
record for seven years, and bankruptcies linger for 10 years.Bad
credit scores can be costly, but you're not stuck with a poor credit
score forever. Once you know how lenders weigh your behavior, you
can take the right steps to improve your image. (Find out more about
what goes into your credit score here.)
To undo any of your credit mistakes, you'll need to
take the slow and steady route to re-establishing proof that you're
a good credit risk. If you know you'll be in the market for a big
purchase, like a home or car, it's never too early to start improving
your score. (As an added bonus, better credit scores can also improve
your credit card interest rates.)
Before you begin, get copies of all three of the credit
reports issued by the three major reporting agencies (Equifax, Experian,
and TransUnion). You're entitled to one free report from each bureau
every year. All three might have slightly different information.
Scour the reports for any inaccuracies and request that they be
fixed. (The different reporting agencies will give you instructions.)
Perusing these reports will also give you a good idea of where you
might be misbehaving.
Once you've done that, start tackling the problems
that can bring down your credit score:
Pay all your bills on time every month. Payment history is the biggest
component of your credit score, so improving your record here can
do a lot of good. If you've missed payments in the past, get caught
up and stay current. Paying off a collection account will not remove
it entirely because it will stay on your report for seven years.
But establishing a recent record of timely payments, and maintaining
that record for as long as possible, can go a long way toward building
a good credit score.
Start paying down your credit cards and other revolving
credit. Lenders want to see whether you're maxing out your available
credit, something that raises a big, red flag signalling potential
credit peril. Moving your debt among your cards may get you a lower
interest rate (important for eventually paying those balances off),
but it won't do much for your score.
Don't open a whole bunch of new credit card accounts
at once. Although you might think this could work in your favor,
by making your credit card balances look smaller when compared with
your available credit, it could backfire. One variable in your credit
score looks at new accounts, and too many could make lenders think
you're primed for a shopping spree. In fact, holding accounts for
a longer period of time works in your favor, so don't rush to close
your oldest accounts if you're trying to maximize your credit score.
If you plan to shop for a car loan, a mortgage, or
something else that might require a number of inquiries to your
account, try to do it in a short period of time. The credit scorers
do recognize the difference between a hunt for one new loan and
a frenzied attempt to open as many credit lines as possible.
If you have a truly checkered credit history, do apply
for a loan or a secured credit card and make timely payments to
begin re-establishing good credit. It might take a while, but you'll
eventually be back in lenders' good graces.
Mostly, lenders and credit reporting companies want to see you be
a good financial citizen. That means complying with the terms of
your loans, keeping your debt in check, and making timely payments.
In this case, punctuality definitely pays.
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