Having a bad credit history can impact significantly on your lifestyle. It means that you will be unlikely to be accepted for a loan and if you are, you will end up paying large amounts of interest as providers will consider that you are a bad risk. There are companies who specialise in loans for those with bad credit but charges are high.
A lender such as Citrus Loans wants to see that you can maintain regular payments on an amount of credit and that there is a history of you doing that. If you have defaulted in the past or if you have been taken to court, it is important that you work to repair your credit history.
This can be done by taking out a loan. Even at a high rate of interest, it would be worth taking out a small loan and paying it back over a short period of time. That will show on your credit file and encourage the lenders to consider you as less of a ‘bad risk’. It is not wise to take out a large loan at this stage as payments are likely to be high and you would not want to default again. It is important when taking out a loan that you consider your budget and consider any changes that are likely over the course of the loan. Is your job likely to change or are your outgoings likely to increase? Budgeting is important as you do not wish to default again.
If you are a member of a Credit Union, it may be worth approaching them as they tend to offer a more favourable rate of interest on their loans or if you are in no hurry, join a Credit Union and take out a loan with them at a later stage.
Credit Cards are often easy to come by and people use a credit card to help with their credit score. It works in much the same way as a loan in that you are effectively borrowing money and then paying it back so if you were to use your credit card during the month and then pay it back at the end of the month, you are again building evidence of your ability to handle credit. It is always advisable to set up a direct debit with your bank which will allow payment of the card in full every month as it can be difficult to remember if you have to do it manually.
In summary, a loan of any type, paid according to the terms agreed can reassure lenders that you are a risk worth taking. By taking out a loan, you are offering that evidence. It may take more than one loan which is why credit cards can also be a useful tool. Remember though, taking out too much credit can have an adverse effect as the lender assumes that you will not be able to afford more. Every time you apply for a loan, the lender will run a credit check and too many credit checks can be problematic and reduce your overall credit score so guard against applying to too many lenders at the one time.