Posted on January - 21 - 2010
How to Get a Loan With a Bad Credit Score
Your credit rating plays a vital role in your ability to be approved for secured loans. It is ideal to have a credit score over 700 with the max being 850, although most banks only require a credit score of 620 for some loans. It is easier to get secured loans such as a mortgage or car loans then an unsecured personal loan. In these cases if your score is below 680 your odds of being approved are slim. Even if you are your interest rate will be very high, the lower your score, the higher the interest rate.
Getting a secured loan, such as a home loan, in Ireland when you have bad credit can be a challenging task. Most people unfortunately do not know what their credit is really like nor their credit score. They are unaware that most of our purchases and financial transaction are stored on a computer and sent to the Central Database. If we purchase on credit, or in installments of any kind, there is a record of it. Every loan and credit card transaction is part of your record. So are some bills.
Even if we pay off the balances, if payments are late, missed or even if there is an error that is not your fault, it will reflect badly on your credit to bring down your score. Most people learn this the hard way when they apply for a loan and are denied. Even with minor problems that have been fixed it can take years for your credit to clear up. All is not lost though.
There are different tactics you can employ to build and repair your credit score. It may take time and will require patience. Unfortunately it takes much longer to clean up a credit mess than to make it. The first thing is to pay your current balances and bills on time. Too many people think that since there credit is shot there is no hope.
Once you have made all your payments of debt and regular bills on time for 6 months you will have options. While most of the banks out there still will not loan to you there are new progressive lenders who will. Of course you will pay a higher rate but in time if you make payments and prove you are once again trustworthy you can get the loan redone at a traditional lender.
These lenders can arrange loans both for home buyers and those who are seeking to remortgage an existing home. There are three areas they will consider when deciding how much you can borrow. How much the home is worth, how much your income is and how many other loan commitments you have such as a car loan.
When you are getting a new home loan or remortgaging they will lend up to 80% of the value of the home. Once you get past this they will look at your income and current loan commitment. It is vital that you can afford you new home loan or remortgaged loan and still be able to pay you current financial commitments. The maximum you can borrow will be based on what the monthly payment will be. The monthly payment can not exceed 35%-40% of you disposable income, that is you income after taxes and other loan obligations.
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