5 Reasons Why You Need A Good Credit Score Even When You’re Retired

Retirement is your reward for committing to years of hard work. But while you may be planning to see the world, finally write that book, or just spend lots of time with your grandkids, you may not be giving much thought to your post-retirement credit score. You may believe that, upon exiting the workforce, you can stop worrying about those pesky credit reports, but this couldn’t be any further from the truth.

Still not convinced? Here’s a look at five reasons why keeping an eye on your credit score should still be a priority throughout your retirement.

1. Credit card rewards programs

Many savvy retirees choose to utilize credit cards for everyday expenses, as a good card can enable you to accumulate rewards. As long as card payments are made in full each month, you can avoid interest while still reaping the benefits of buying with credit. If you keep your FICO score high, you’ll enjoy access to the best credit card rewards programs – including platinum-level travel cards. This can make it a lot easier for you to manage airfare, hotel costs, and other travel expenses throughout your retirement.

2. Great insurance rates

Auto and homeowners insurance agencies look to credit scores when quoting monthly premiums. When your credit score is higher, you will appear to be more responsible, resulting in lower overall insurance payments. Even if you have been insured with the same company for years, you should never stop shopping around for a better policy. Keeping your credit score high can help you to find all of the best deals, and will provide you with negotiating power with insurance agents. This is especially important in retirement, as any monthly savings can provide you with more capital for both regular expenses and making the most of each day.

3. Refinancing your mortgage

Although entering into retirement without any debt is a noble goal, the reality of the matter is that nearly 40 percent of senior homeowners, ages 60 to 64, carry a mortgage. This statistic, provided by the research of Strategic Business Insights, makes it clear that retirees should make plans for managing mortgage payments after work. Those with a high credit score will enjoy the luxury of being able to refinance their mortgages, enabling them to save significantly on monthly payments… Ultimately, this could mean the difference between being locked down by your home, or living the dream.

4. Keeping an eye out for identity theft

Retirees who believe their credit scores to be irrelevant may not take the time to review your credit reports each year. This is bad news, as senior adults are often targeted for identity theft, and unless you regularly monitor your reports, you may not realize that you have been victimized. To minimize your risk, be sure to always keep an eye out for suspicious activities or mistakes.

5. Second acts

For many individuals, the meaning of retirement has changed dramatically. Instead of viewing retirement as the closing chapter of life, a growing number of retirees are viewing this as a “second act” – a time wherein they have the ability to pursue their dream careers, and finally do the work that they love. This may mean becoming the author of a children’s book, building custom furniture, or selling crafts and artwork at trade shows. While many second act goals may not require a lot of capital investment, some do. Having a good credit score could make it easier for you to obtain any necessary loans.

Your credit will always matter. By keeping tabs on your score, you’ll enjoy a happier, more peaceful retirement.

Author Bio: This article was written by author and blogger Chase Sagum. Chase covers Economic topics for BestCreditScoreCompanys.com.

Lenders Without Credit Checks

Consumers do not always have credit scores to get the money they need in an emergency.

The biggest challenge in securing a loan is the credit check.  This is a record of every account that a borrower has open, the balances on those accounts, the credit limits the borrower has available and a list of every late or missed payment.  This comprehensive look at a person’s finances strips away the humanity of the borrower, and reduces the borrower to nothing but a set of numbers.  Banks refuse to loan money to people with low credit scores, so where do borrowers go to the money that they need?

Pawn Shops

For centuries pawn shops were the only place that people could go for consumer credit.  These were shops were potential borrowers could take a portion of their belongings and offer something as collateral in exchange for a loan.  The loan was always for the short term, and the loans were designed to be paid back with interest before the items would be returned to the borrower.  Even today, pawn shops act as one of the easiest places for consumers to get money quickly.  There is no credit check needed; pawn shop employees just evaluate the value of the items to be pawned and make an instant decision about how much money they are willing to lend.  The problem with pawn shops is that the consumer must give up the items in order to get the loan.

Car Title Loans

Another collateral based short term loan option is a car title lender.  These companies allow consumers to trade in the clear title of any vehicle they own and get money based on the estimated value of the vehicle.  Again, there is no need for a credit check, because the value of the vehicle is equal to or less than the total value of the loan and the lender can easily recoup the cost of the loan by repossessing the vehicle if the loan falls in to default.  Car title loans allow the consumer to continue using their vehicle during the duration of the loan.  The problem with car title loans is that not every borrower has a title that is free and clear, and often the vehicles these borrowers do own have very little value.

Payday Loans

The newest trend in short term loans are payday loans.  This is money that is given to the borrower based on paychecks that are directly deposited into the borrower’s bank account.  Payday lenders do not worry about credit checks because they have the ability to reach into the borrower’s account and make payment withdrawals on payday.  Getting approval for a payday loan is incredibly quick and easy, with most applications taking less than ten minutes.  The problem with payday loans is that the fees associated with the loan can often cause the borrower to fall into a debt cycle, where each pay period the consumer has to borrow money because a good chunk of the previous check went to paying off the last loan.

Consumers have options when looking for short term loans.  Depending on their situation and what the borrowers have for collateral, choices range from a simple pawn shop transaction to a payday loan.

Author Bio: My name is Bill Carleson and I used to have terrible credit and had to take many loans out through a company called payday loans Australia that really helped me due to not having credit.  Over time I have learned a lot about them so I wrote this article to share a little about what I learned overtime. 

4 Key Things That Will Raise Your Credit Score

If you want to buy a new TV, there is a good chance that you don’t need credit for that and have enough cash to buy one. Do you want a new car? You don’t necessarily even need credit for that. How about a house? Chances are you are going to need a mortgage to buy that house. Do you qualify for one? If not, you need to start building credit. This can take some time. But here are four important factors that will build your score.

Pay On Time

I know I know, this isn’t some big secret. But it’s one of the most important things you can do to for your credit rating. A single delinquency on your credit report can haunt you for years. So do whatever you need to do to remember to pay on time such as marking your calendar or setting up automatic payments through your bank.

Get A Secured Credit Card

This really only applies to people who have awful credit or zero credit. The way a secured credit card works is that you send the credit card company say $500. They then send you a credit card with a $500 limit. You’ll have to pay a high interest rate and fees, all for borrowing your own money. However, if you are at the beginning of a credit recovery, this may be your only option.

It may not be the most desirable option, but this will help start the process of establishing a positive credit history and begin to rebuild your score. Just use it from time to time, then pay it off every month. Once you establish some credit history, you can get a different card and ditch the expensive secured credit card.

Debt To Credit Ratio

Your debt to credit ratio is an important factor on your score. What does it mean? For example if you have a credit limit of $1,000 and you have a $900 balance, your debt to credit ratio is 0.90, or 90% utilization. Lenders want to see you with a lower utilization. I know it seems like a sad Catch-22: showing that you REALLY NEED credit makes you less creditworthy.

Paying balances down will quickly raise your score. In fact, if you are in need of a quick score boost of a few points, go pay something down. The optimal debt to credit ratio is around 25%. Which leads me to my next point:

Don’t Close Your Old Credit Accounts

Have a card laying around that you don’t use? Don’t close it, hold onto it. Here is why. Lets say you have an old card with a zero balance on it, with a $4,000 limit. And then you have one other card with a $4,000 limit, and you have a $2,000 balance on it. With both cards, your debt to credit ratio is 25%, which is great. However if you close the old account, your debt to credit ratio changes. Even though you are only $2,000 in debt, you now only have access to $4,000 in credit. This raises your debt to credit ratio to %50.

Also, older, more established accounts will also contribute to your credit score. So if you have an old account that is in good standing, keep it, and keep it in good standing.

All four of these things are really there to help you demonstrate the most important thing: that you are a reliable borrower. It’s wise to think about your credit before you actually need it. Trying to spruce your credit up a month before you want to get a mortgage isn’t going to do you a lot of good. So plan ahead, and most importantly: be reliable.

Author Bio: Matt Hansen is a former realtor, investment property owner and contributor to the website Rental Property & Mortgage Headquarters.

25% Of All Credit Reports Are Innacurate

The credit bureaus have come out with “studies” claiming that there are very few errors that show up on people’s credit reports. They have said that less than 1% of credit reports contain errors. For many years many of us have suspected that there are errors showing up on our credit reports. Some studies have even come out saying that 80% of credit reports have errors on them! But the credit bureaus still insist that only 1 in every 100 credit reports have errors in them. So who is right?

The credit bureaus swear that 99% of credit reports are completely accurate. And yet other sources show much different results. But we don’t completely know these other sources, so we’re left not knowing who to trust.

Well in comes the FTC. We all know who the Federal Trade Commission (FTC) is. We know that they are a government agency set up to protect consumers. So if they come out with a study talking about the accuracy (or inaccuracy) of credit reports, we know we can trust them.

FTC Study shows that 25% of all credit reports have inaccuracies

The credit bureaus are stating that only 1% of credit reports contain errors. But according to a new study done by the Federal Trade Commission, that is absolutely not the case. So what did the Federal Trade Commission’s study find? Definitely not that all credit reports are completely accurate.

The FTC came out with a study in February of this year that found that “One in four consumers identified errors on their credit reports that might affect their credit scores.” That means that 25% of all credit reports contained errors in them. That may not be the 80% that some studies have shown, but that still shows that if you are the 1 in 4 Americans, your credit reports may contain incorrect items on them. So even though it’s only 25%, that still means that if I am one of those 1 in 4 people, I could be living with a lower credit score than I deserve. I could be denied for credit, or I could be paying higher interest rates than I deserve, all because of completely inaccurate items on my credit reports.

How to find out if you are part of that 25%

So how do you know if you are part of that 25% of people that have inaccurate items on their credit reports, that could potentially be brining your credit scores down? It’s actually quite simple. All you have to do is order copies of your credit reports. You can order free copies of all three your credit reports once a year.

So, order free copies of your credit reports and look over them very closely. Make sure that all of the items on there (and all of the aspects within each item) are accurate.

What to do if you have errors on your credit reports

If you do notice that you have fallen into that unlucky 25% and there are errors on your credit reports, you have the legal right to dispute those items to have them corrected or removed from your credit reports. You can do this on your own, or you can hire a credit repair company to do this on your behalf. They can also read through your credit reports for you (they can be a bit confusing for most people) and help you identify those inaccurate items that may be on there.

The author who contributed this article is Chase Sagum, Financial and Business blogger. Check out more of his content at www.lexingtonlaw.com.

Rebuilding Credit after Bankruptcy

An ordeal that too many Americans experience is to be in such financial distress as to have no other option than to file for bankruptcy. After years of struggling to pay your bills on time, asking lenders for a break and eventually falling so far behind that there’s no chance of recovery, you make the agonizing decision to file for bankruptcy protection. It’s a decision that never comes easy and is understandably embarrassing, especially when debts you had good intentions of repaying are forgiven so that you can begin anew. After a judge approves your appeal, much of your financial burdens have been relieved, but now you’re left with a trashed credit score and a long road back to a healthy financial reputation.

Impact of a Poor Credit Score

A perfect credit score is 850. But for most lenders, you will enjoy low interest loans and credit by maintaining a score of 723 or more. Drop below 620 and you’re more likely to be rejected or find it difficult to secure bank loans at reasonable rates. And even if you are approved, at the low end of a score, you will be charged an additional six percent APR for the privilege, raising the cost of borrowing substantially.

A bankruptcy will have a devastating effect on your financial future with your score dropping by as much as 200 points. That’s enough to make it impossible to be approved for a loan or line of credit. Neglect to improve your score and you may be denied for as long as the bankruptcy remains on your credit reports. Chapter 7, 11, and non-discharged or dismissed Chapter 12 and 13 bankruptcies will be displayed on your reports for up to 10 years.

There’s no doubt that a bankruptcy can have a negative effect on your credit scores. But for those who had a lengthy history and a good score before filing, the impact may not be as devastating as many think. The first step in reversing your score is to know where you stand by requesting two of your credit reports to determine an average. Use this figure to gauge how well you’re doing as you follow these tips to begin reestablishing a healthy credit history and improve your score at a quicker pace.

Review your credit reports! Take the time to go over them thoroughly for errors. Discrepancies can be costly, not only by lowering your scores but by giving lenders the wrong impression of your ability to manage your bills. Accuracy is vitally important to your score. If you discover false information, immediately file a dispute with the credit reporting agency for a correction or to have false information removed. Check for:

  • Late payments, charge-offs, collections or other items that aren’t yours.
  • Credit limits reported as lower than they actually are.
  • Inaccurate accounts listed as settled, paid derogatory, paid charge-off.
  • Accounts that are still listed as unpaid that had been included in a bankruptcy.
  • Negative entries more than seven years old (10 for bankruptcy) that should have been removed.

Pay every bill, on-time, every time! One missed payment could be devastating to your credit score with a drop of up to 100 points. This becomes even more important following a bankruptcy. You must, once again, show evidence that you are able handle your finances responsibly.

Eliminate revolving credit debt! If you happen to still have credit debt not eliminated by bankruptcy, work on reducing these debts first. By lowering your overall credit card debt, you will increase the total amount you have available to spend – a plus to lenders looking at your credit reports. In fact, keeping your balances below 30% of their combined limit will help raise your score. Pay off balances so that you have fewer accounts to juggle, making it easier to manage your bills. It’s a good idea to focus on the accounts that you’re closest to paying off rather than the ones with the highest interest rates to have paid off accounts posted to your credit reports.

Open a new line of credit! What may seem like bad advice will actually help raise your credit limit and be a good sign for potential lenders in the future. While it may be difficult to open new accounts after bankruptcy, you may be able to begin this process again with basic gas or retail cards. Just be sure to use the account minimally and pay it off in full each month. In addition, your credit score will benefit from having a variety of loan types – mortgage, car loan, personal or student loans.

Never close your older accounts! Closing an older account won’t help your scores but may hurt them. Any account that demonstrates a lengthy credit history is valuable to your credit score. Keep your older cards active by using each for a small purchase at least once per year.

No matter how little or far your credit score drops after a bankruptcy, you’re financial future will benefit from your efforts to rebuild and raise it up again. Remember, scores that slipped only slightly still may have an impact on future borrowing. Remain diligent in maintaining responsible financial habits and you’ll build up to or maintain a healthy score. Remember, bankruptcy is meant to help you with a new beginning and opportunity to take what you’ve learned and deal with your finances with a fresh outlook and new approach…take advantage of it.

Author Bio: Noreen Ruth is a regular contributor to www.asapcreditcard.com and numerous financial-related blogs and websites. She specializes in credit and debt-related issues and enjoys educating consumers about the latest rules and regulations, as well as ways to build, improve and maintain good credit.

How A Pre-Paid Credit Card Can Help A Loved One With Their Finances

People from all walks of life are increasingly finding that they are struggling with their finances. Vulnerable members of society like students, the elderly or even an unskilled workers are struggling to get by due to increases in the cost of living. Prepaid cards can be a practical way to help loved ones who are struggling. Without the pitfalls of cash like the risk of theft, loss and poor self-control, prepaid cards can be loaded with funds and topped up when necessary, without the risk of going overdrawn.

Giving a prepaid credit card as a gift

This is a particularly popular option with parents of students living away from home. Transferring money into your child’s bank account makes it all too easy for them to take it out as cash and spend it unwisely on unnecessary purchases or big nights out. If you give a prepaid credit card as a gift it is more likely that the money will be spent on essentials such as shopping and text books. Further more you can actually see what they’re buying with the itemised bills.

Credit CardAt the end of the month, if they need more money it is a simple matter for you to top up from afar, with most companies offering the option to top up online or over the phone. This is a much safer option than sending cash, or a card that has already been topped up to any significant value in the post, as it can end up very costly if this goes missing.

Prepaid credit cards as a way of managing money

As you cannot go overdrawn on these cards, once the money is gone, it’s gone. This might be a harsh reality at first, but at the end of the day, if you are relying on your overdraft or credit cards to get by every month, you are spending too much.

Because prepaid cards are easy to top up, even without the cardholder being present, they are a great way for you to help out a loved one if they are struggling at the end of the month. Discuss an amount which they will put on it every month for essentials and it should help the receiver to budget better. Going over the itemised bills together can be way to learn better spending habits and keep tabs on what the money is being spent on. However, the option is always there for you to load more money onto the card if it is needed. Putting the money on the card is a reliable way of ensuring it is spent as intended.

Using a prepaid credit card for safety

Many elderly people are not used to the idea of using a credit or debit card, and tend to carry around quantities of cash that the rest of us would frown upon. Giving them a prepaid credit card is a great compromise. They can still effectively withdraw money from the card at regular intervals as they would their cash, but it is much safer for them to carry around.

Although the receiver might find it difficult getting used to using the card itself, the fact that it is not linked to their bank account and cannot go overdrawn even if they lose it, might help them ease into the idea of using a card, whilst having the budgeting advantages of cash.

Which is the best prepaid credit card?

PB Visa Gold Credit CardThere are many different prepaid cards on the market, and the one that will be most suitable for you and your loved one will vary depending on how you want to use it. Most come with a fee for topping up. On some this will be a set fee, whilst on others you will be charged a small percentage. If you are topping up a large amount of money once a month then a set fee might be better, whereas if you will be topping it up little and often just to help somebody get by, a percentage top up might be a better option.

Look for companies that have simple fee structures and outline their charges in clear, easy to understand terms. That way, you know what to expect from the start.

 

By Gavin Whittaker

This article was written in association with Tuxedo Prepaid, a leader in the field of currency cards and prepaid technologies.

Gavin Whittaker is a finance journalist with many years of experience. Gavin excels in articles that explain the advantages of currency cards, presenting new technologies for credit card safety and analysing the financial markets and he is sharing his insight on these issues with readers of a wide variety of blogs, online- and print-magazines.

Why Don’t Banks Always Offer Free Credit Scores?

While the words free credit score may perk up your interest, don’t get too excited as what you see is certainly not what you are hoping to get. When struggling with credit issues, monitoring your credit core is key to ensure you are improving your score, managing on payments, and sidelining potential errors that can badly damage your credit.

Do banks offer free credit scores?

Recently, Wells Fargo offered free credit scores to their customers for a limited time. After further investigation, however, it appears that this is not exactly what most people are looking for. Traditional FICO scores are in the 300-850 range. Wells Fargo’s VantageScore is an adjusted version of the their 501-990 scale.

It is important to remember that FICO scores are not free. Credit reports are free once each year, but these do not produce your actual credit score. When you choose to look at free credit scores what you are actually getting is an “estimated” score, based on your FICO.

Credit ScoresBanks do not always offer free credit scores because they don’t own them. Due to strict lobbying on behalf of financial interest groups, it is nearly impossible to get your score for free. Banks do not own your credit score, but merely provide information on your account standing and credit worthiness to consumer reporting agencies such as Experian, Equifax and Transunion, which are in turn monitored by FICO (Fair Isaac).

Are estimated scores even worth it?

Though you may not be getting the real thing, having a scaled version of your FICO score can still help. The FICO is what is used by most mortgage and credit companies to determine your creditworthiness. Since free scores reflect an estimate of your creditworthiness it is usually a good indicator of whether or not you actually have good credit. If you have a high credit score, your estimated score will be high and vice versa. Where this can be tricky is if you are one of few buyers in middle ground, whose score borders fair and average credit.

Can you ever get a free FICO score?

So, can you get ever obtain your FICO score for free? When you go to purchase a car, the company will run your credit to check out your trustworthiness and likelihood of paying the car off in time. If you really want to check your score for free, simply go in to a car dealership and have them run your credit to see “if you qualify.” The dealer will produce a paper with your actual FICO score. Be sure to take a strong-willed friend with you in order to quickly and effectively shoot down any sales tactics.

Another option for getting your credit score for free is through signing for a free trial through Fair Isaac, the owners of FICO themselves. Their Score Watch service monitors and reports any changes to your credit. You can access the trial for 10 days for free, after which you should cancel the trial to avoid the $14.95 fee for 3 months of credit monitoring.

How much is my credit score?

If you just want to purchase your FICO score you can do that too. It costs $19.95 every time you would like to see it and can be accessed through the Fair Isaac website.

Be Careful

Though you can check your credit score for free in this way, don’t do it too often. As Credit Repair firm Lexington Law warns, each credit score that is requested on your behalf shows up on your credit report. Too many of these requests, and your score will go down. This is because companies perceive you are out seeking too much credit and may incur debt.

Author Bio: This article was written by author and blogger Chase Sagum. Chase covers Financial and Economic topics from a political perspective around the web.

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How to Lower Credit Card Interest

You just realized you have been paying high interest rates and you do not know what the problem is? Here are some steps you can consider on how to lower credit card interest.

How much interest are you paying?

The first step you should take is look at the amount of interest you pay. This is done by collecting your latest statements of your credit cards. Listed at the top or at the end should be your Annualized Percentage Rate or APR. Alternatively, you can inquire about your APR fro, your credit card company. It is also advisable to do a search on what rates the credit company is offering new customers. By doing this you can get yourself lower rates.

Make a comparison

Making comparisons means you compare your credit card rates to those of national averages. Websites, for example, bankrate.com, cardweb.com and creditcard.com can be of help to you. From the websites, you will be able to compare the new credit card rates offered to borrowers.

What Rate should you be paying?

It is prudent to determine your credit score before calling the credit company and know where it lies. With this information, you can then be able to determine the exact rate you should be paying. It is easy to know your credit score if you do not know yet. You can click on the relevant website which have a lot of information that will assist you, depending on your country. In this case for example, you will click on the ‘credit score’ option from your account and it will be shown to you. A ‘super prime’ credit score, for instance, means you should not be charged within the regular ‘prime’ rate category. With this information, you can lower your credit card rate. Ask the company why they are charging you higher when you should be charged in a totally different category of rates.

Calling the credit company

You are now fully equipped with the necessary information and you have to make that important call. How do you go about it? Remember this is your financial situation at stake and if you do not do what you have to do, your rates will go on shooting higher and leave you in debt. Pick up the phone and ask to be put through to the relevant personnel. Explain your current credit rate and go ahead to state your credit score. Remember to ask the reason why they charge you higher rates when they offer better rates to other competitors. It may not work to your favor with the first call but do not give up. Call again and negotiate.

Credit card companies always lower rates, in fact, every single day. If you are not satisfied, however, you can ask the company about debt management plans. This can be taken as a last resort when everything else does not work. The credit company will help you restructure your debt situation, giving you a different lower rate. Make that call today and enjoy lower credit card interest.

Roger is a freelance writer that loves to cover financial topic. You can visit site here.

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How to Get a Loan With Bad Credit

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One of the unfortunate things about bad credit is that it most affects the people who need good credit the most. If you have bad credit then this probably means that you haven’t been able to pay off your loans and other financial commitments, and that means that you probably don’t have enough resources for your day to day living. Such a person is likely to need loans and other financial help, but the resulting bad credit means that they can’t get it –or that they have to pay more for it. It’s an unfortunate paradox, but there are ways out of this vicious circle. Here we will look at how you can get a loan even with bad credit.

choosing LoanChoosing the Loan

 

The first thing you need to do is to choose the loan you want and to know precisely how much you need. This is important as it gives you the information you need to make further decisions. Decide then on whether you need such a large loan, or whether you could make a bigger deposit somehow using help from others or by selling something.

Choosing the Company

3D Realty HandshakeYou then need to look for a company who is willing to give you that loan and who will offer you the best rate. Different companies offer different rates for the same loan depending on their particular policies, and different companies will be better suited to different demographics. If you have very bad credit then what you need is a ‘poor credit loan’ or even a ‘guaranteed loans’. These credit companies will give you a loan regardless of how bad your credit rating is which means you will never be unable to get your home, car or whatever else it is that you’re trying to afford.

In some cases you might even find that a loan isn’t the best option for you at all, and that you would do better buying on finance. Be careful though, as buying things on finance is much less flexible and means you don’t really ‘own’ the item you have bought until the end.

Secured Loans

 

secure loansAt the same time though the cost of these guaranteed loans is likely to be higher and you will still find that you benefit from giving them assurance. One way you can do this is to secure your loan, which means putting up an asset of some kind as collateral. The traditional way to do this is by securing your loan against your property which essentially means that if you can’t pay off the loan, your home will be repossessed and that money will pay it off for you. This guarantees the lender will get their money one way or another so you can get a much cheaper rate – but note that it’s of course only a good idea to use this strategy if you are certain you can pay the loans back.

Improving Your Credit Rating

Likewise it is also still pertinent to improve your credit ratings as much as you can before you take out the loans. This means paying off all your existing loans, making sure that you use your bank account well, and taking out a credit card and ensuring you make all your repayments. This process can take a while so sometimes the best way to get a loan with bad credit is to just wait a while if you can afford to.

Matt M. is a finance expert and has written many articles that advise people regarding personal finance and loans. He has good credit score explained  through his posts that is of great help for people with bad credit score.

Personal Loans for people with bad credit

Too often people with bad credit find it very difficult to secure a Personal Loan. They can get quite desperate in their search, and it is not uncommon for people to get involved with loan sharks. But what other avenues are open for personal loans for people with bad credit? Hilary Bowman offers some tips …..

Unsecured Personal Loans With Bad Credit: Why They Are Available to Those In The Know

Applying for unsecured personal loans with bad credit is no simple matter. The reason is down to the fact that the lender needs to be convinced the loan will be repaid. This is usually done by meeting their set criteria.

When it comes to traditional lenders, like banks, personal loan approval with no security is quite difficult to get, especially when a bad credit score is part of the equation. Banks like to know that they at least have something from which to get compensation should the loan be defaulted upon. Not having that security makes them nervous.

Understandably, getting unsecured loans approved requires a more selective approach, but it is important to know that it is by no means impossible to get the funds that are needed. Often, the difference between success and failure is the application itself, not the bad credit status.

Why Unsecured Loans Exist

Personal Loan Bad creditThere is no great mystery as to why lenders are willing to grant unsecured personal loans with bad credit. Statistically, most people do not possessions of the required value to provide as collateral. So, if unsecured loans were not offered, then lenders would miss out on a large amount of business.

Also, personal loan approval with no security is not such a detrimental move by lenders, with statistics showing that the vast majority of borrowers do repay their loans. By charging a higher rate of interest to compensate for the perceived extra risk, lenders make higher profits that cover losses from defaulted loans.

Also, being able to get unsecured loans approved, means that borrowers (if they have valuable items) do not need to put any of their own possessions at risk for what might be a relatively small loan.

Apply for What is Realistic

With that in mind, knowing what is possible is a key aspect when applying for unsecured personal loans with bad credit. Put simply, no lender will approve a loan that is too expensive to repay, so a person earning $5,000 will not be approved for an unsecured loan of $1 million. Realistic applications are far more likely to succeed.

Knowing your credit score is a good place to start when assessing what is affordable. The chance of getting unsecured loan approval with no security is greater when this is known, because the application can be tailored to suit. For example, a very low score like 500 will not help when seeking a loan of $25,000, but may be okay when seeking $3,000.

Of course, scores can be improved over time. It is easier to get small unsecured loans approved, such as payday loans, which can be repaid in full in a short period of time.

Sometimes what the applicant thinks is affordable is not what the lender thinks is affordable. Granting an unsecured personal loan with bad credit is a risk for any lender, but the income and the amount of existing debt the applicant has is a core issue.

All lenders go by the debt-to-income ratio when bad credit scores are a factor in the equation, but it is especially important when considering personal loan approval with no security. The ratio refers to the amount of debt an applicant already has compared to the amount of available income.

Set at 40:60, it means that debt is limited to 40% of the available income, so the borrower does not over-extend himself, even when getting an unsecured loan approved, even with bad credit.

Hilary Bowman is a Financial Expert who specializes in Loans for People with No Credit and Bad Credit Loans

Article Source: http://EzineArticles.com/?expert=Hilary_Bowman

More Tips: Video – Personal Loan Tips if you have bad credit

The best way to get a personal loan with bad credit is to have someone with good credit act as a cosigner. Learn about the added responsibility of having a cosigner for a personal loan with information from a registered financial consultant in this free video on money management. More information: click here

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