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Bad Credit Loans
Having a bad credit history makes it difficult to be accepted for mainstream loans or credit of any kind in the UK. Fortunately for people who have acquired a bad credit record, there are specialist providers of bad credit loans ready to help out. Such companies will consider credit and loans applications from people who have CCJs to their name, or have defaulted on loans payments, are struggling with mortgage arrears or are subject to bankruptcy orders.
Bad Credit Loans Lending Criteria
The criteria used by loans companies for assessing eligibility for bad credit loans varies. Overall, an applicant's bad credit record is given less weight in the credit scoring system, allowing other factors that help to paint a picture of how good (or bad) a risk the applicant is to the loans company to shine through. If a loans company dealing in bad credit loans can see that you have a degree of stability and reliability about your lifestyle, even if you have a bad credit profile, then you are more likely to be accepted for bad credit loans.
So, what are these 'other' criteria that loans companies focus on when assessing a bad credit loan application?
1) Security - This is typically a loan company's first port-of-call. If you are a homeowner and have equity in your home then you are much more likely to secure loans in spite of a bad credit record. This is because if you fail to meet the loan repayments the loans company can take your property to recoup their costs. Bad credit applicants who are tenants are generally unable to satisfy this criteria.
2) Employment - Proof that you have been in continuous employment for several years may count favourably towards your credit scoring when applying for bad credit loans. Your type of employment may also have a bearing, but is often of less concern to loans company than the amount of time that you have been in the job. For self-employed people, this criteria can be a stumbling block.
3) Debt to income ratio - Many lenders will also factor in your income vs. your outgoings, including payments to service other loans. You may be required to present a personal expenditure budget to support this so the loans company can determine your ability to manage payments from any new loans they award you.
4) Recent credit history - Several loans companies will choose to only use your last 6 or 12 months credit history in their credit scoring system. If your credit history problems are further back in time then you're more likely to be offered the loan.
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