Know Your Bad Credit Loan Application

We all like to think of ourselves as fairly responsibleor any debt claims, any negative reference of debt
and trustworthy people, especially when it comes tocollector agencies, any declaration of bankruptcy. All
financial commitments. But the fact of the matter isthese records provide the lenders more clear view to
that some people are more reliable and responsibledecide what kind of borrower the applicant is and his
than others and banks and other lenders know this.her attitude towards the debt in question.
The one thing and universal question, all lenders areSo your credit report also contain a section listing
interested in, is will you be able to pay back the loan?your past habits and behavior. Previous loans from
For all their complicated methods and computerother lenders will be put up on the report by those
databases, that one question is really all they arelenders and they will record if you have paid them
worried about at the end of the day. The only realback in full and on time or if there have been
way to find out this out is to speak to the personproblems with getting you to meet repayments. For
individually, get to know them, do business with themthe same reason, past court judgments against you
and see how they pay you back. However, inin debt claims, references to debt collection agencies
today's market with online banking, bigger and biggerand if you have ever declared bankruptcy will also be
customer bases and less personal relationshipsrecorded. This will give lenders a far fairer and more
between bankers and their clients, banks and lendersaccurate picture of what kind of borrower you are
have had to come up with alternative ways ofand your attitude towards debt.
assessing the credit worthiness of customers. lendersThe applicant background: Your Background Counts
are vary much interested in applicant intention orFinally, information such as your level of education,
motives and capacities to repayment, at the sameyour employment, and your income will be in the
time they also rely on their own skills to make thereport. The reason for this is to show how much
bad creditors to make repayments.money you earn or are likely to earn, and therefore,
Credit assessmenthow much you will be likely to be able to afford to
The universal and most reliable method they haveborrow and pay back. If we take the example of the
come up with for assessing credit capacity of thepoor mother above, who always repays her debts in
applicant is the credit rating, or credit report. This is afull and on time, no matter how could her intentions,
file that exists on pretty much every adult in theif she only earns fifteen thousand a year, no bank will
country that stores all sorts of relevant informationbe able to justify lending her five hundred thousand
that might give lenders a clue as to how you will actto buy a yacht and a nice house in the country side.
if they lend you money. Their prime concern to knowTherefore, as long as they are satisfied that you are
any thing which might give any clue relevant to yourssomeone they want to lend to in the first place, your
repayment capacity.earnings will be significant in deciding how much the
The credit report will contain all your personalbank can safely lend you, and that you will be able to
information such as your name, address, age, genderpay back.
and so on. This type of information will already startThe last section of credit report usually focuses on
to give them a picture of how you are likely to actapplicant's personal information such as educational
with credit. Generally speaking, a fifty five year old, isqualification, current employment salary structure,
more likely to act responsibly then an eighteen yearliabilities family background and other information. This
old, however, when you start to increase the agesection helps the lenders finding out how much the
past sixty five or seventy, the risk increases that theapplicant earns and what amount the applicant can
borrower will not be around long enough to fullypay comfortably as monthly installment, after
repay the loan. As well as your age, you addresssubtracting the liabilities. To make it clear, let us
may give them a similar picture. It is a fact thatassume, an applicant earns 10 thousand unit monthly
people living within certain postcodes will be far moreand his personal expense comes at 5 thousand
likely to repay loans then people living in othermonthly and also pays a monthly installment of 2
postcodes. So even before looking at any of yourthousand towards any other loan-It means his total
financial particulars, the bank will be able to give youmonthly expense comes at 7 thousand and his saving
some sort of score based solely on your personalis 3 thousand, which is the amount he can
details.comfortably pay towards any other loan. Now, If he
However, this will be a very rough picture and therewants a loan of X amount of which the monthly
will be literally millions of exceptions, for example, theinstallment comes at, say, 6 thousand to be paid for
wealthy business man on Park Lane who has avoided48 months, very clearly he can't pay 6 thousand
millions in loan repayments using clever lawyers willmonthly. In this case the options are either to reduce
not be an attractive person to lend to no matterthe loan amount from X or increase the payment
what his details say, and in the same way, a poorduration from 48 months.
single mother struggling to make ends meet but whoThe credit report will compile all of this information
has paid every debt she has ever had in her life, inand present to lenders as a single score, with
full and on time, is likely to continue with this habitgenerally speaking, the higher the score, the better
and so will be quite an attractive person to lendthe chance that you will repay the loan. If all the
money to.so the credit report also contains the pastinformation compiled on you leads to a low score,
financial habits , previous loan and repayment fromyou will be classed as a bad credit loan applicant and
other lenders, lender experience and their remarks (the terms at which lenders will be willing to lend to
like whether the applicant has paid them back in fullyou will be less attractive, if they will lend to you at
and on time or there have been difficulties inall. You can see your credit report for yourself and if
repayment schedule). The credit report has athere are any mistakes on it that you think will
separate section financial - legal activities of theworsen your score, you have a right to have them
concerned like any past court judgment in money suitcorrected.