Factors responsible for bad credit history & remedies

| January 14, 2013

Having a bad/impaired credit history can seriously dent an investor’s chances of securing credit for future investments. Regular loan providers always prefer handing out loans to people with sound and clear credit history, and for obvious reasons. Credit lending is a very risky business and any loan sanctioned to the investor with bad credit history has the highest chances of adding on to the Non Performing Asset (NPA) list of the bank resulting in loss to bank. Loan disbursement to bad credit borrowers therefore, is very risky and traditional lenders refrain from entertaining applications from such people.

home loans and credit

Factors responsible for bad credit history

· Unpaid bills or tax in the past

· Late payments towards a debt

· Mortgage or loan arrears

· Discharged bankrupts

· Debt written-off

· Repossessed residential property

· Tax debts and unsecured debt consolidation(credit cards and personal loans)

· Company administrations and court judgments

· Making several application for loan at one time

Considering the number of loan defaulters in the market at present, many banking institutions and online lenders have come up with a solution called Bad credit home loans. These loans are nothing short of boons for bad credit borrowers now.

Bad credit home loans/mortgages basics

These are specially designed by the financial institutions for borrowers with impaired credit background i.e. people who have already defaulted in some of their previous loan payments. The bad credit mortgage industry is growing at an unabated pace and the growth is estimated to pick even more momentum over the next few years.

Remedies for improving bad credit history

It is very difficult to open a standard bank account, especially if it comes with an overdraft for bad credit borrowers, leave aside other transactions. Therefore, such borrowers should just apply for a bad credit bank account. It would directly indicate that the person is managing his money properly now. Such a person should keep track of the credit history by using services of a credit reference agency. Most borrowers with impaired credit history apply for too many loans at a time resulting quick rejections. One should try to leave a gap of at least 6 months between two successive applications and concentrate on one application at a time. Too many applications can only turn lenders suspicious and wary of handing out a loan to you.

1) The applicant should have the latest information on his credit as well as loan default history. He should apply for new credit only after clearing his pending liabilities on a priority basis. He should be aware of the simple fact that higher the age of the default history, the better it is for him.

2) It is always recommended that the applicant should demand a relatively lower loan to value ratio. However, the applicant may have to provide enough supporting arguments to disprove himself as a potential credit risk.

3) The applicant should have an adequate active source of income. The borrower should also prove it well in front of the lenders as it can help him to get access to some good loan packages.

4) Utility and Telco type defaults are considered less severe than financial defaults. Such defaulters should always hunt for advice from a financial expert/agency before applying for a bad credit mortgages.

 Red Rock Mortgages is an independent mortgage finance company specializing in property finance solutions for investors & borrowers with specialized lending needs

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Category: 2012, finance, home loans, loan rate, Mortgage rates

About the Author ()

Red Rock Mortgage Group is a specialist mortgage finance consultant an independent mortgage finance company specializing in property finance solutions for investors & borrowers with specialized lending needs. Thanks

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