As with any kind of loan or mortgage, getting a loan for home improvements is made more difficult if you have a bad credit rating. Lenders are reluctant to give large loans to people with a history of failing to make repayments or defaulting on loans. With the economy having been severely damaged – in part because of lenders’ past recklessness in giving loans to those with poor credit histories – lenders are now even more cautious than they used to be.
Getting a loan, which might have been arranged with few questions ten years ago, is now a much more complicated process, with significant obstacles in the way of those of who have had financial problems in the past. All of which doesn’t mean to say that you will find it impossible to get a personal unsecured loan for home improvements if you have a bad credit rating, but it pays to be aware of your situation and prepared for some potential difficulties.
Your credit rating
If you are at all worried that you may have a bad credit rating, the first thing to do is to find out as much as you can.
Contrary to popular belief, there is no universal credit rating system, and nor is there a single credit history blacklist. Each lender has its own criteria for allowing someone to borrow money, and uses its own system of making the necessary checks and investigations.
That being said, there are currently three organisations in the UK that are able to give you a good indication of how your credit rating will be perceived by potential lenders: Experian, Equifax and CallCredit.
By entering your details into one of these organisation’s websites, you will be able to learn where you stand in terms of your credit rating. If you have a history of failing to make loan repayments or missing credit card payments, or if you have a joint account with someone else who has had such problems, you are likely to show up as having a bad credit rating. Although these organisations’ findings are not the sole criteria that lenders will look into, they are a reliable indicator of whether or not your loan application will be viewed in either a positive or a negative light by lenders.
Getting a loan with a bad credit rating
Many lenders are willing to offer personal loans to those with a bad credit rating, but with higher interest rates and stricter terms. If you are homeowner, you may find it easier to get a secured loan than an unsecured one, although this shouldn’t be entered into lightly, as it is your own home that will be used as collateral and is therefore at risk. Always shop around, and be careful not to accept that first deal that is offered to you. It’s also a good idea to seek independent advice from an impartial organisation such as Citizens Advice www.citizensadvice.org.uk
There are also ways of improving your credit rating. By making sure that you have paid off any existing debts, are on the electoral register and are not in any financial relationships with anyone else who has a bad credit rating, you can begin to increase the likelihood that lenders will look on your loan application favourably.