Bad credit loans are a form of unsecured credit. The reason they get called ‘bad credit’ loans is because they offer an accessible way to access payday loans for people with bad credit, i.e. who either have a poor credit history or a very limited or even no credit history.
People with a low credit rating may struggle to take out a loan from high street banks and low interest rate lenders because they can be seen as unreliable – often, a bad credit file indicates a person has missed previous repayments or has taken out credit they haven’t been able to repay. Even if you’re in a much better financial position now, your credit file may haunt you for a while: this can make it difficult to get a loan and therefore frustrating if you know that you can repay it.
You might also be considered to have a bad credit history if you haven’t been using credit for a long time. This is known as a thin credit file – literally because there is not a lot of information for lenders to base their decision. It doesn’t necessarily reflect badly on you, it just means you haven’t been able to prove yet that you are a reliable customer. Using credit facilities like credit cards or even phone contracts, (and obviously making your repayments in full and on time) will improve your credit score making credit easier, and possibly cheaper, to obtain in the future as lenders will be able to see the evidence that you are a responsible borrower – and therefore that they will get their money back. (suite…)