It goes without saying that if you do not have a good credit score; it is bound to affect your finances adversely. On top of that, there is no quick fix method to move away from this situation, and while you work at improving your credit score, is there still a way to keep improving your finances? Let’s find out.
First things first, credit score directly affects your debt management by restricting your ability to borrow and also the rates of interest on any future loans you might apply for. Debt management is an inseparable part of your money management, is bound to affect your overall financial situation as well.
Understand your Creditworthiness
In the eyes of a prospective lender, you are less of a liability when you have a good and steady income, a good financial status, movable or immovable assets if possible, good spending habits, and most of all, a commendable record of managing and repaying debts in the past.
If you mess up on the last part for some reason, despite good income and status, it will drastically reduce the chances of landing a good deal on your future loan requirements. Defaulting on debts can happen for several reasons, including for the simple reason that you had too many debts to pay off with expenses shooting up dramatically at the same time.
Now, this may not feel like such a bad thing on your part, but lenders do take these things very seriously. So, you need to start working on improving your credit score and look for better and smarter ways to manage and seek any future debts.
Borrowing with a Poor Credit Score
It is not the best of ideas to go for loans with a lower credit score than is desired, but if you need the funds for something important, there may not be much you can do about it. Bad credit loans may not be that hard to find in the UK, but it can be pretty hard to secure a healthy rate of interest on your bad credit loans.
You can alternatively apply for provident loans which might help you wish away the financial blues. You can borrow from £1000 – £3000 depending on your individual needs for a term of 13 weeks, 26 weeks, or 52 weeks as part of a provident loan.
It is also possible to avail of such a loan with a poor credit history, but at best these loans are useful for fulfilling comparatively smaller financial obligations. It holds especially true if you are looking to borrow a hefty amount to meet some significant expenses.
Going for unverified direct lenders or online lenders for loans with a bad credit score may not be a good idea. There are all kinds of financial scams you could fall prey to if not careful with your choice of lenders.
How to Improve Repayment of debts
It is essential to repay your outstanding debts on time so that your credit score doesn’t keep slipping further down the slope and you have a chance to get things back in shape. There can be several ways to go about it. To do this, you can consider opting for a debt consolidation loan which would help pay off all your outstanding debts.
Debt consolidation loans show up along with other loans in your credit history, but once you have repaid your debts, it is shown as settled and does not affect your credit score negatively. You can find debt consolidations for up to £25,000, but you need to calculate how much you need to repay your debts and how much can you afford realistically.
The key is to look for lower charges which do not wipe off your savings and look for lower interest rates on your debt consolidation loan. However, if you take longer to repay the loan, obviously the charges will go up. It is imperative to not default on your consolidation loan for it can seriously mess things up for you.
Manage your Credit Card Debts
The best way to manage your credit card debts is not to take any credit card debts. This holds good because they tend to have higher charges and still higher rates of interest that would eat into your savings before you realise. Often people let their credit scores be affected because of mismanaging credit card debts or not recognising the fallacy of borrowing with your credit card.
This is why, for smaller requirements, you have the option of provident loans to explore if needed. It is always wise to borrow just what you need instead of looking at your loans as some funding scheme for your expenses.
Your credit score may have a significant role to play in your finances, but there are ways to sort things out in an intelligent and informed manner. The key is not to rush in for an unsecured loan offer you might get and to borrow only as much as you need for the moment.
Except for emergencies, consider postponing things for which you can plan after the current outstanding debts are cleared. This is not as hard as you might imagine. Make repayment of debts your priority and align things likewise. Your credit rating and financial situation will start improving before you realise it.